“…looking at data from the last few weeks suggests that we need to be on “recession watch.” Global GDP is clearly slowing down, and the data we are getting from the US suggests that we are going to see a serious falloff in GDP over the next few quarters.” Commentary at…
http://www.mauldineconomics.com/frontlinethoughts/recession-watch#recession
CRUDE INVENTORIES UP (Reuters)
“Oil prices gave up gains on Wednesday after data showed U.S. crude stocks rose more than expected last week, while gasoline stocks increased and distillate inventories fell. The Energy Information Administration reported crude inventories rose by 3.1 million barrels in the last week…” Story at CNBC…
http://www.cnbc.com/2015/10/06/crude-oil-futures-push-higher-after-range-breakout.html
IS THE FED GOOD AT PREDICTING THE ECONOMY? – NO (Global Economic Analysis)
“The following video should make people think twice about listening to anything that Chairmen of the Fed Ben Bernanke says. It's a compilation of statements he made from 2005-2007 that will have your head spinning.” The video is embedded here…
http://globaleconomicanalysis.blogspot.com/2015/10/ben-bernanke-superman-or-fool.html
RALPH ACAMPORA – SIGNS OF A BOTTOM (CNBC)
“[Ralph] Acampora, who predicted major problems for the market in late July, said the charts are now showing signs of a bottom, and he believes the worst could be behind us… ‘If you're looking at the S&P 500, the number that is important is that September 17 high of 2,020,’ said Acampora, who is often referred to as the godfather of technical analysis. ‘If we take that out, we're off to the races again and I think that's going to happen…I think the odds are we go higher here and not lower,’’" Story at…
http://www.cnbc.com/2015/10/07/the-market-is-off-to-the-races-ralph-acampora.html
I’d say we may be close to a bottom, but I don’t think we have had a decent test of the prior low yet and that is needed to make an all-clear call, but I won’t wait forever.
MARKET REPORT / ANALYSIS
-Wednesday, the S&P 500 was up about 0.8% to 1996 at the close.
-VIX finished down about 5% to 18.40.
-The yield on the 10-year Treasury crept up to 2.06%.
The advance–decline line is now indicating an overbought condition. Some of the current upward move is probably due to the oversold indication 4-days ago. This is a pretty quick reversal as the 10-dMA of breadth hit “56%-advancing” Wednesday (i.e., 56% of stocks on the NYSE have advanced over the past 10-days). One might think that this guarantees the correction is over - unfortunately, no. Curiously, the 10-dMA of advancing stocks peaked at 57% a month before the bottom during the 2011 correction before tanking back to 41% at the final bottom. These extreme bounces in a correction are not unusual. Of course, the correction might be over, but the numbers at the retest suggested otherwise. For more on the subject see my comments in paragraph “Market Report/Analysis” on 5 October.
That said there have been signals the other way too suggesting the correction is over. (I posted them a few days ago.) Here they are again:
(1) XLI is now beating the S&P 500 in the short term.
(2) The smart money has been buying the Index late in the day.
(3) New-highs outpaced new-lows Monday and have continued to do so.
(4) Breadth has improved
(5) VIX has been falling.
The S&P 500 chart may be the most telling indicator. It made a triple top Wednesday. If it can climb higher it may indicate the correction is over. A failure may send the index on a trip back toward the August low. If the Index can close above the 2000 level on consecutive days, I may have to concede that it is likely that the correction is over assuming Market Internals and the 5-10-20 Timer are positive.
Sentiment or %-Bulls (measured as a 5-dMA of the amounts invested in Rydex/Guggenheim bull/bear funds: bulls/[bulls+bears]) has fallen to 54%-bulls. That’s a lot closer to a bear indication (less than 50%) and I still suspect this correction will not end until the Sentiment is below 50%-bulls.
This correction is very similar to the 2011 correction. In 2011, the correction lasted 108-trading-days. The current correction has lasted 96-trading-days so far (as of Wednesday), assuming it isn’t over.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 56% Wednesday vs. 53% Tuesday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 50-day moving average of advancing stocks rose to 49.8%. That’s remains a negative, but it has been improving and Breadth is looking good.
New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +27. (It was +8 Tuesday.) The 10-day moving average of the change in spread rose to +25 Wednesday. In other words, over the last 10-days, on average; the spread has risen by 25 each day. The internals remained 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
Wednesday, the NTSM long term indicator was HOLD. The Price & Volume indicators are positive. The VIX indicator is negative. Sentiment is neutral.
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.
