“I regularly like to ask myself, “what the most hated asset class on the planet?” simply because what is most hated usually presents the greatest opportunity. … Today, cash has now become the most hated asset class on the planet. What makes me say this? Well, investors are willing to accept negative returns …The bottom line is this: once everyone believes “cash is trash” we are likely already moving toward the time when cash will once again “king.” – Jesse Felder. Commentary at…
http://jessefelder.tumblr.com/
WHERE WEALTHY INVESTORS ARE PUTTING THEIR MONEY (CNBC)
“Rich investors have been pouring more money into private equity to avoid a potential stock market downturn, according to a new report.” Story at…
http://www.cnbc.com/2016/09/12/wealthy-investors-are-putting-more-money-into-private-equity.html
PARTY LIKE IT’S 1999 (AND 1929) (Hussman Funds)
“By equating the delay of consequences with the absence of consequences, investors have now set up the most extreme episode of equity market speculation in U.S. history next to the 1929 and 2000 market peaks.” - John P. Hussman, Ph.D., Weekly Commentary from Hussman Funds at... http://www.hussmanfunds.com/
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 1.5% to 2159 at the close.
-VIX dropped about 13% to 15.16 at the close.
-The yield on the 10-year Treasury remained 1.67%.
A little history: My calm-before-the-storm indicator blew up in Dec 2014 and the market dropped by about 1.5% on that day. It recovered about half of that loss the next day, when the Index was up by about 0.5%. On the third day, the S&P 500 was down another 1.5%. The same indicator blew-up Friday. So we are left with a question: “Was Friday a one-and-done event based on Monday’s bounce back?” We may find out tomorrow, day three. The evidence says there’s more downside ahead.
-Monday’s new-highs equaled new-lows; the spread new-highs minus new-lows was zero. This is a significant decline since the spread was +241 just 4-days ago. This stat is the battleship that is slow to turn, but can be a harbinger of trouble when it does.
-A huge move like Friday is often the start of something worse; that’s the basis for my calm-before-the-storm indicator. Given that the Index has been stalled for a month, I'd guess something worse.
-Stocks above their 50-day Moving Avg. (d-MA). Usually, this stat and the Index travel in reasonably close correlation. We can see that the stocks above their 50-dMA tends stat to lead the S&P 500. The percentage of stocks above their 50-dMA has been falling sharply since mid-July. It looks like it’s time for the Index to catch up. This stat is bearish. Tuesday’s action may give us clues for the future.
Chart from…http://www.indexindicators.com/charts/sp500-vs-sp500-stocks-above-50d-sma-params-x-x-x-x/
Oversold? Neither Bollinger Bands nor RSI were oversold as of Monday. Moves were so small, leading up to the “oversold” readings Friday, I am ignoring both Friday “oversold” readings anyway. I think it was a statistical aberration.
VXX Trade. I am still holding VXX since the data looks like there’s some further downside ahead. How much is hard to say. When I calculated Sentiment using bull/bear Rydex funds Saturday, it was apparent that traders in the Rydex funds were buying the dip as of the close on Friday. I suspect if dip-buying continues, the markets are still likely to stall near the high. We need a pullback to clear the air, but it doesn’t have to be huge – it could be though. We’ll see.
SHORT TRADE
I am still holding short positions in SH and QID.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) jumped to 53.1% Monday. It was 49.8% Friday. A number above 50% is usually BULLISH for the markets.
On a longer term, the 150-day moving average of advancing stocks climbed to 55.2%. A value above 50% generally indicates an up-trend. The McClellan Oscillator declined from -48 to -22 (percentage calculation method).
New-highs outpaced New-lows. The spread (new-highs minus new-lows) slipped to zero Monday. (It was +6 Friday.) The 10-day moving average of the change in spread was -19. In other words, over the last 10-days, on average, the spread has decreased by 19 each day. Market Internals switched to neutral on the market.
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).
LONG TERM INDICATOR
Monday the Price indicator was positive; Sentiment, VIX and & Volume indicators were neutral. The long-term indicator remains HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONOn 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks. I expect to add more stocks should we get the anticipated pullback.
The NTSM system indicated Buy at the 11 Feb bottom; and again 2-days after the bottom on high up-volume; and from 22 Feb thru 25 April. I ignored the early signals convinced that it was a bear market bounce; I ignored more recent signals due to overbought conditions. I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.
