“A disappointing August retail sales report suggested that consumers were again holding off on spending in order to keep a higher savings rate. While goods spending growth did slow in August to 0.4% after increasing 0.7% in July, the softness was offset by an unexpectedly strong 0.5% increase in services spending.” Details and charts at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/income.htm
CONSUMER CONFIDENCE (Reuters)
“The Conference Board, an industry group, said its index of consumer attitudes rose to 103.0, the highest since January…” Story at…
http://www.reuters.com/article/2015/09/29/us-usa-economy-confidence-idUSKCN0RT1PQ20150929
This measure of consumer confidence seems to be tracking hiring rather than the Michigan Sentiment survey that reflects the recent stock market decline.
MARKET REPORT / ANALYSIS
-Tuesday, the S&P 500 was up about 0.1% to 1884 at the close.
-VIX finished down 3% at 26.83.
-The yield on the 10-year Treasury fell to 2.05%.
The Russell 2000 fell below its 25 August correction low yesterday (Monday) and again today as it closed about 2% below its correction low. Volume declined both days, but not dramatically. It looks like the Russell may be putting in a bottom, but the signal is not strong. It could also lead the markets down.
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.
This correction is similar to the 2011 correction. In 2011 the correction lasted 108-days. The current correction has lasted 90-days so far.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 43% Tuesday vs. 46% Monday. (A number below 50% is usually BAD news for the markets. On a longer term, the 50-day moving average of advancing stock rose to 46.2%. That’s remains a negative.
New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-475. (It was -479 Monday.) The 10-day moving average of change in the spread fell to -41 Tuesday. In other words, over the last 10-days, on average; the spread has fallen by 41 each day. The 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 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. Since the Index is 1% above the prior low it may be too late to sell now. This indicator shows that the market is not healthy, but we could still see a quick turn-around at the bottom.
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.
While I don’t expect a test of 1868 immediately, it could happen. If I am able to identify a BUY point before the close on a test-day, I will post it late in the day. If so, I will buy SSO or QLD in the trading portfolio. These are 2x ETF’s that double market moves up or, dangerously, down. (XIV is also a good play on a falling VIX.) I would also move to a 75% invested position in the Retirement account.
These are high risk moves, so don’t do it unless you have a high tolerance for risk. There were several bottoms in the 2011 correction, but fortunately, the market didn’t fall much further after those false bottoms.
