“The U.S. economy grew almost 4% in the second quarter, powered by higher consumer spending and a bit stronger business investment than previously reported, revised figures show. Gross domestic product — the value of everything a nation produces — rose at a 3.9% annual rate from April to June…” Story at…
http://www.marketwatch.com/story/us-growth-raised-to-39-in-second-quarter-gdp-report-shows-2015-09-25
CONSUMER SENTIMENT DOWN (US News)
“Worries about the global economy pushed American consumers' spirits to the lowest level in almost a year, the University of Michigan reported Friday. The university's consumer sentiment index fell to 87.2…” Story at…
http://www.usnews.com/news/business/articles/2015/09/25/consumer-sentiment-falls-to-lowest-level-in-nearly-a-year
My cmt: No surprise here. Sentiment tends to track the stock market.
GLOBAL MARKETS GETTING UGLY (Charles Hugh Smith)
“You'd have to be in full denial mode not to see that it's getting ugly out there in global markets: currencies are melting down, trade and shipping are tanking, commodities are swooning and global stock markets are increasingly on central-bank life support.” Commentary at…
http://charleshughsmith.blogspot.co.uk/2015/09/global-markets-its-getting-ugly-out.html
EXTREME BEARISHNESS (Marketwatch)
“Bearishness has reached an extreme not seen at least since the top of the Internet bubble in early 2000. Yet this is a bullish omen, according to the inverse logic of contrarian analysis: Extreme levels of bearishness indicate that there is a very robust “wall of worry” for the market to climb.” Commentary at…
http://www.marketwatch.com/story/stock-investors-havent-been-this-bearish-in-15-years-2015-09-25
My cmt: What? Bearishness has not been this high “since the TOP of the Internet bubble”? (my emphasis) How can they write this stuff. If it signaled a top in 2000, perhaps this is a top. Actually, my measure of bullishness (or bearishness) is based amounts invested in Rydex/Guggenheim, bull//bear funds rather than a survey. Investors may say they are bearish, but they are betting bullish in the funds I track. Investors are currently positioned at 60%-bulls on a 5-dMA basis. That remains high especially given that it was 30% at this point in the 2011 correction before the S&P 500 bottomed down 19%.
MARKET REPORT / ANALYSIS
- Friday, the S&P 500 was down about 1pt to 1931 at the close.
-VIX finished unchanged at 23.47.
-The yield on the 10-year Treasury rose to 2.26% on Yellen’s comment that “predicted,” again, that interest rates would probably rise in 2015.
It was an interesting day for S&P 500 watchers. The Index bounced up to 1950 four times and then punched upward to 1953 around 1PM. It stalled, fell back and again tried to punch above 1950, but failed. That left a classic, bearish Head-and- Shoulders formation on the Index and it promptly fell more than 1%. It rallied back to finish slightly down on the day. All in all, this sort of action is not bullish since the Index failed to hold its highs.
This correction is similar to the 2011 correction. In 2011 the correction lasted 108-days. The current correction has lasted 87-days so far. Long-term measures of breadth, the 100-dMA and 200-dMA of the percentage of stocks advancing, are very similar to those seen in 2011 at the same time in the correction. This all suggests not much farther down and possibly an end to the current correction in a few weeks.
A re-test of the 1868 level may give us an answer.
The Death Cross remains in effect since the 50-dMA is below the 200-dMA for the S&P 500. This is a long term signal for many. In 2011, the Death cross occurred about 7% before the low. In 2010, the Death Cross first occurred at the low so it was not a good signal then.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 48% Friday vs. 48.6% Thursday. (A number below 50% is usually BAD news for the markets. On a longer term, the 50-day moving average of advancing stock fell to 46.5%. That’s remains a negative.
New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-120. (It was -340 Thursday.) The 10-day moving average of change in the spread rose to zero Friday. In other words, over the last 10-days, on average; the spread has remained unchanged each day. The internals switched to neutral on the markets based on improving new-high/new low data. Breadth got worse so there were mixed signals.
NTSM
Friday, the NTSM long term indicator was SELL. Price is positive because this correction is long in the tooth; this particular indicator within the “Price” category has a very low weighting in the overall system. The Sentiment indicator is neutral. VIX and Volume indicators are negative. VIX and Volume are the highest weighted. The S&P 500 is about 50pts above the lowest low of 1868 or 3% below the current level. Since the Index is 3% from the prior low it may be too late to sell now. This indicator shows that the market is deteriorating, but we could still see a quick turn-around.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONG-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 70%
C-Fund (S&P 500): 15%
I-Fund (EFA): 15%
This is a conservative allocation. The number one priority now is return of capital; not return on capital.
