“The Empire State general business conditions index nose-dived to a reading of negative 14.9, from positive 3.9 in July, marking the worst level since April 2009, the New York Fed said. The index, on a scale where any positive number indicates improving conditions, was far worse than the positive 4.5 forecast…” Story at…
http://www.marketwatch.com/story/empire-state-index-tumbles-to-recession-era-levels-2015-08-17
I usually don’t follow the Empire State data, but it was a big drop.
TOM MCCLELLAN CALLS “THE” TOP (MarketWatch)
“[Tom] McClellan said his timing models suggest “THE” top in stocks will be hit sometime between Aug. 20 and Aug. 26. He expects “nothing good for the bulls for the rest of the year,” he said in a phone interview with MarketWatch.” Story at…
http://www.marketwatch.com/story/market-timer-tom-mcclellan-sees-stocks-set-up-for-ugly-decline-as-early-as-thursday-2015-08-17?dist=lcountdown
DOW NOW IN NEGATIVE TREND (ChartWatchers)
“The US markets continue to s-l-o-w-l-y roll over with the Dow Industrials leading the way…When a market rolls over slowly like this, the first thing to go is the uptrend's momentum and, yes, we see that as the MACD {a measure of moving averages converging or diverging} has been moving lower for months. The next thing to happen is increased interaction with the 50-period moving average. Next up are tests of the 200-period moving average and it draws closer and closer. Then comes a definitive break below the 200-period average and then finally the "Death Cross" {the 50-day crosses below the 200-day} occurs - which is where we are at with the Dow.”
Chart and analysis from ChartWatchers, the Stock
Charts.com Newsletter at…http://stockchartscom.cmail1.com/t/ViewEmail/r/A2F1B22872944DE92540EF23F30FEDED/AAB2A0774A84F6EA16B21F2806CB3AEB
The article pointed out that the S&P is not there yet and the Nasdaq looks in better shape still. The S&P 500 50-day moving average (d-MA) is 2095 and the 200-dMA is 2077 so it would only take a 1% drop to create a death cross on the S&P 500. That seem less likely now because it appears that the S&P 500 made a short-term bottom Monday.
MARKET REPORT / ANALYSIS
-Monday, the S&P 500 was up about 0.5% to 2102 at the close.
-VIX was up about 1.5% to 13.02.
-The yield on the 10-year Treasury dipped to 2.15%.
Gee…the options and bond guys didn’t get the message.
After my recent blog comments and the commentary from others above, you might surmise my take on the market is negative. Surprisingly, no - the markets look much better today, at least in the short run. Here’s why:
-Monday, the S&P 500 tested the 7 August prior low of 2078 in the AM and bounced up from there. With today’s lower volume (compared to the 7 Aug value) it looks like the market will move up from here. Lower volume implies less fear and less selling
-Market Internals made a complete reversal Monday and are now positive. (Gomer was right; “Shazam!”)
-Tick (the last trades of the day) was a very high 670 suggesting follow thru is likely going forward.
-I suspect the market will make it back to prior highs – after that, it’s anybody’s guess. I am short-term bullish, but long term bearish.
LONG TERM BREADTH – STILL NEGATIVE, BUT IMPROVED
The 50-dMA of stocks advancing on the NYSE rose to 48.6% Monday, from 48.3% Friday. Below 50% is not good; it simply means that more than half of the stocks on the NYSE have gone down over the past 2-1/2 months. To counter that negative, the 10-dMA of Breadth moved up to 51%, so the more recent trend is up and I think it will carry the 50-dMA up too fairly soon. (No guarantee there – we’ll see.)
Only 40% of Stocks on the NYSE are above their 200-day moving average as of Friday – this number is way too small. Unless this improves – markets are going down. (The average is 64%.) All we can do here is to watch this number and see if it improves and by how much. A correction hasn’t been avoided yet.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 51% Monday vs. 48% Friday. (A number above 50% is usually GOOD news for the markets. Again, New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-51. (It was -54 Friday.)
The 10-day moving average of change in the spread rose to +5, Monday. In other words, over the last 10-days, on average; the spread has INCREASED by 5 each day. Internals switched to positive on the markets.
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
Monday, the NTSM long term indicator is HOLD. Indicators haven’t changed in a while. Price is positive, because up-moves have outpaced down moves recently. All other long-term indicators remain neutral.
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 25%
I-Fund (EFA): 25%
(This is a conservative position most appropriate for retirees or conservative investors.) I think all investors would be well served to cut their stock investments to a lower than normal (for each individual) allocation. Until longer term technicals look better, the old adage that one’s stock allocation should equal your age subtracted from 100 seems reasonable. (40years old: 100-40 = 60% in stocks) 50% would be the lowest stock allocation unless conditions deteriorate.
