“…with all three major U.S. averages now firmly in correction territory, one noted market analyst, who has been calling for a sharp selloff, says the bleeding could be far from over. "World growth has slowed somewhat, quiet significantly, and I think U.S. growth has slowed a lot," Raoul Pal of the Global Macro Investor and Real Vision TV told CNBC's "Fast Money" on Monday.” Story at…
http://www.cnbc.com/2015/08/24/led-collapse-sees-this-ahead.html
My cmt: So far, my thesis is that this is a normal correction and the S&P 500 is probably already near the bottom. No guarantees though; if you believe the above report, sell and stay out until a buy signal is clear.
CONSUMER CONFIDENCE (Yahoo Finance)
“The Conference Board said Tuesday that its index of consumer confidence increased to 101.5 in August, up from a revised July reading of 91.0. It was the best showing since January. Conference Board economist Lynn Franco says that consumers' assessment of current conditions was considerably more upbeat in August…”
http://finance.yahoo.com/news/us-consumer-confidence-shows-sharp-141653382.html
My cmt: Consumer confidence tends to track the stock market so expect this value to collapse next month.
MARKET REPORT / ANALYSIS
-Tuesday, the S&P 500 was down about 1.3% to 1868 at the close.
-VIX fell about 12% to 36.02. (I am still surprised that the options market didn’t give a warning via the VIX that a major correction was imminent. In 2011 the VIX was wound up months before a significant collapse. The options boys weren’t worried about the drop in the Index today…)
-The yield on the 10-year Treasury rose to 2.13%. (…neither were the Bond Ghouls.)
Technically, today (Tuesday) was a successful test of yesterday’s low. The volume was significantly lower and market internals improved. That’s a classic buy signal, but it is too soon after a rather significant panic event. I’d expect a lot more back and forth before a real bottom is in. BUT…it should lead to the bounce we didn’t get Tuesday. There is at least one major cross current to that thesis:
The S&P 500 dropped 60-points in the last hour. That’s huge and the selling may carryover until tomorrow morning. If the morning is down, Wednesday could see a big turn-around and rally based on Tuesday’s technicals.
Again, I expect a bounce Wednesday that might last a week or so, but if the S&P 500 closes significantly below 1862, all bets are off.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 36% Tuesday vs. 35% Monday. (A number below 50% is usually BAD news for the markets. Again, New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-237. (It was -1256 Monday.) Again, there were only 2 new-highs Tuesday.
The 10-day moving average of change in the spread rose to minus-13, Tuesday. In other words, over the last 10-days, on average; the spread has DECREASED by 13 each day. Internals remained negative 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
Tuesday, the NTSM long term remained SELL. Price, VIX and Volume indicators are negative. Sentiment is neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 70%
C-Fund (S&P 500): 15%
I-Fund (EFA): 15%
I’ll buy some XIV for a short-term trade if the VIX climbs above 40 assuming the S&P 500 has not made a new low on high volume. It may take a while for the VIX to spike.
