"I wouldn't use my worst enemy's money to buy these stocks. We would avoid China altogether," said Chad Morganlander, portfolio manager at Stifel Nicolaus' Washington Crossing Advisors…."We think that the Chinese economy is going to be a major anchor for global growth in 2016," Morganlander said. "And that will be dragging down valuations or at least keeping valuations across the board on the S&P as well." Story at…
http://www.cnbc.com/2015/11/23/dont-buy-chinese-stocks-with-worst-enemys-money.html
WEAK BREADTH - THE NIFTY
“Five companies -- Amazon.com, Alphabet/Google, Microsoft, Facebook and General Electric -- have collective returns that account for more than the entire return of the [S&P500] index year-to-date, according to a note from Goldman Sachs.” - Yahoo Finance
“Breadth is a huge warning sign. That fewer and fewer stocks participate in rallies is synonymous with topping action.” -Mike Shedlock, Global Economic Perspective
http://globaleconomicanalysis.blogspot.com/2015/11/nifty-fifty-becomes-fab-five-return-of.html
Mike pointed out that Amazon has a trailing PE of close to 1000 and a forward PE of almost 120. The others weren’t much better. It just may be that we have seen the top. I’ve pointed out other stats that show the same lack of breadth. At the top last May only 2.3% of stocks made new highs. Ominously, at the top in 1929 only 2.3% of stocks made new highs. The only time this was lower at a major top was in 1960 when the stock market had the real nifty-50 – less than 2% of stocks made new-highs then.
EARNINGS AND REVENUES (FactSet)
“For Q3 2015, the blended earnings decline is -1.6%. If the index reports a decline in earnings for Q3, it will mark the first back-to-back quarters of earnings declines since 2009…The blended revenue decline for Q3 2015 is now -3.9%.... fewer companies are reporting sales above estimates (45%) relative to the 5-year average. In aggregate, companies are reporting earnings that [are] 5.3% above the estimates….Looking at future quarters, analysts do not currently project earnings growth and revenue growth to return until Q1 2016…The forward 12-month P/E ratio is 16.4, which is above the 5-year and 10-year averages.” Excerpted from FACTSET Earnings Insight at…
http://www.factset.com/websitefiles/PDFs/earningsinsight?b_start:int=0
SEASONALITY TRADING
The best days are the 2-days immediately preceding a holiday; the last day of the month and the first 4-days of a month. Thanksgiving should is surrounded by several favorable periods. Last week was the best week for the year. Perhaps traders jumped in ahead of the seasonality dates; this week and next should be interesting.
MARKET REPORT / ANALYSIS
-Monday, the S&P 500 was down about 0.1% to 2087 at the close.
-VIX rose about 1% to 15.62.
-The yield on the 10-year Treasury dipped to 2.25.
This past Wednesday there was an up-volume reversal that suggested further gains, but it was on somewhat weaker volume overall so I’d say it was a mixed signal. If this current rally (that started a week ago) fails without making a new high, I think that would be a bearish sign. The period right around the Holiday, including the first of the month, is bullish so we’ll see how this plays out.
After the Holiday, my guess is that the market moves down. Possible support levels are: The 50-dMA on the S&P 500 is 2008. A 50% down retracement would put the market at about 1990. The chart looks like an important level is around 1930-1940. All of those levels should be watched for a possible buy signal. A retest of the 25 Aug low is still possible.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 50.6% Monday vs. 47.4% Friday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks remained 49.2%. A value below 50% indicates a down trend.
The McClellan Oscillator (a Breadth measure) remained positive Monday.
New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-39. (It was -36 Friday.) The 10-day moving average of the change in spread was +2 Monday. In other words, over the last 10-days, on average; the spread has increased by 2 each day. The internals switched to 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
Monday, the NTSM long term indicator was BUY. The Price & VIX indicators are positive. Sentiment and Volume indicators are neutral. I remain skeptical that this is a good time to get in. My prior blog posts explain the reasoning. My Price indicator in the NTSM system often is bullish at a top since it is a trend follower.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONAll cash: G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 100%
I made a rather impulsive decision. For my reasons (or lack of reason) see “My Invested Stock Position” in my prior blog at...
http://navigatethestockmarket.blogspot.com/2015/11/factset-earnings-cass-freight-index.html
There have been enough major top indicators recently to warrant more caution than usual.
One needn’t be “all-out” to be well protected if there is a bear market. For example: With 30% invested in the stock market, one would only lose 15% of the portfolio if the market were to be cut in half; one would have plenty to invest at the bottom and 30% in stocks hedges the bet if the markets go up.
