Breadth: Neither Long term breadth (% of stocks advancing over the last 50-days) nor the 10-day breadth has managed to get over 48.3 % in the last three days; a number under 50% is not good.
Market Internals: Internals turned negative on Wednesday and have remained so Thursday and Friday.
New-Highs / New-Lows: The new-high/new-low data also turned down Wednesday and remains negative. The spread (new-highs minus new lows) was in negative territory Tuesday thru Friday and is still looking pretty bad, even with the up-day Friday. (The spread was a negative -54 on Friday.)
VIX: The options indicator, VIX, is neutral and is not signaling much of anything except continued complacency which is not good. The markets haven’t gone anywhere this year, but the options boys aren’t worried. That’s a worry.
RSI: The Relative Strength Indicator never did get to an oversold reading last week and has climbed to 58 - a surprisingly high reading for such a “Nowhere Week”. (Where’s John Lennon when we need him? Actually, I can’t forget; I remember December 8, 1980 as a very sad day.)
The %-of-stocks above their 200-dMA remained flat at about 40% as it has for all of August. That has climbed from its low around 37% in late July, but it hasn’t managed to breakout from its range between 38% and 40% in August. 40% is a low number and is bearish.
Sentiment: Sentiment has dropped back to 80% [{5-dMA of bulls/(bulls+bears)} in selected Rydex/Guggenheim funds]. That’s a good sign; it was 85% in early July and 83% 3-weeks ago. It doesn’t sound like much, but this is a slow moving indicator. The lowered sentiment value “allows” the markets to go higher, but it is not a great timing indicator unless it climbs above the sell point…now 85%.
The yield on the 10-year Treasury climbed to 2.21% Friday morning but, closed the week at 2.2% on Friday.
Volume. Volume was one of the few bright spots as volume dipped on Thursday, at the retest of the prior low suggesting a possible end to the selling. Investors thought so too and bought on Friday. Market Internals remained negative though, so I am not yet convinced that Thursday was the low. Calling short term small moves is more witchcraft than analysis – maybe Thursday was a low; maybe not.
All in all it looks like the market “Doesn’t have a point of view, knows not where he’s going to…”
MARKET INTERNALS
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2014, using these
internals alone would have made a 9% return vs. 13% for the S&P 500 (in on
Positive, out on Negative – no shorting).
Of course, few trend-following systems will do well in an extreme
low-volatility, nearly straight-up year like 2014.
NTSM
Friday, the NTSM long term indicator is HOLD. Indicators haven’t changed in a while. Price is positive, because up-moves have outpaced the size of down moves recently. All other long-term indicators remain neutral.
I am currently 30% invested in stocks, because I decided
to take a conservative position while away on vacation. Whether I reestablish
my 50-50 stock/cash portfolio in the TSP (retirement account) remains to be
seen, but I probably will add to the stock portfolio. It depends on Market Action and whether I
feel lucky. “Well, do ya? Punk.”
