“What is clear, however, is that when stock market action deteriorates and broad economic data is weakening even moderately, the risks of a recession actually jump considerably. The conditional probability of a recession prior to the market falling below its 12-month moving average was just 5-10 percent. It has now jumped to between 60 and 75 percent. This is roughly 6 or 7 times the odds that economists are allowing for a recession. That risk may not yet be priced into the stock market.” – William Hester, CFA. Commentary at…
http://www.hussmanfunds.com/rsi/recesstrends.htm
My cmt: This commentary provided detailed analysis of recession risk when the stock market is below its 12-month moving average. as it is now.
OMINOUS SIGNS IN THE SERVICES SECTOR (Global Economics Perspective)
“Wages and employment are both well in positive territory, but how good is it that wages are going up, input prices are raising, while prices received are close to contraction? Some ominous trends are on the horizon in capital spending, prices received, business activity, with the business climate solidly divergent from the other positive readings.” – Mike Shedlock. Commentary at…
http://globaleconomicanalysis.blogspot.com/2015/10/not-just-manufacturing-strong-warning.html
MARGIN DEBT SUGGESTS CRASH (Jesse Felder’s Tumbler)
“The NYSE margin debt numbers for the month of September were released today revealing a very significant milestone for the stock market. As of the end of September, both stocks and margin debt have seen their 12-month rate of change turn negative. The last time this happened was April of 2008, as the stock market crash during the financial crisis was just getting started. The time before that was December, 2000, the very beginning of the dotcom bust.” Commentary at…
http://jessefelder.tumblr.com/post/131505202275/the-latest-margin-debt-figures-send-an-ominous
I haven’t got too much good news today. Here’s what one technician says is needed to confirm an end to this correction.
IS THE BOUNCE SUSTAINABLE – BULL OR BEAR? (Forbes)
"The index is sitting just under 2,040, which was a key support level from March to August. If 2,040 is decisively broken, the next major hurdle to clear is 2,130 – the summer 2015 highs. If the index is unable to break above 2,040, however, further downside becomes more likely.” Commentary at…
http://www.forbes.com/sites/jessecolombo/2015/10/18/is-the-recent-stock-market-bounce-sustainable/?utm_campaign=yahootix&partner=yahootix
My cmt: I’d add that the S&P 500 must move up enough to get its 200-dMA moving upward. As of Monday, it is still trending down.
MARKET REPORT / ANALYSIS
-Monday, the S&P 500 was UP about a point to 2034 at the close.
-VIX finished down about 0.5% to 14.98.
-The yield on the 10-year Treasury inched up to 2.03%.
Monday, both the advance-decline ratio and Relative Strength Indicator (a measure of the size of up-moves – “RSI”) continue to indicate an overbought condition. “Overbought” suggests some downside ahead. When RSI and the A-D Ratio are both overbought I expect the Index to retreat. Further, up-volume continues to decline so a downturn of some sort seems to be coming.
The 200-dMA of the S&P 500 is still sloping down and that’s Paul Tudor Jones’ (famed Hedge Fund manager and founder of Tudor Investment Corp.) favorite indicator of trend. The trend remains down.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 58% Monday vs. 62% Friday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 50-day moving average of advancing stocks climbed to 50.7%, a good news signal for bulls.
New-highs outpaced New-lows Monday. The spread (new-highs minus new-lows) was +39. (It was +37 Friday.) The 10-day moving average of the change in spread was +1 Monday. In other words, over the last 10-days, on average; the spread has risen by 1 each day. The internals remain neutral 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 was BUY. Price and VIX indicators are positive. Sentiment and Volume are neutral. I am not following this guidance for the time being. The NTSM system is a trend following system and other indicators are suggesting the trend is still down.
I will wait
before increasing stock holdings; I think there will be a better entry point.
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%
