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September 13, 2014 – Weekend Market Comment

September 13, 2014 – U.S. stocks closed down on Friday, breaking five weeks of consecutive gains as investors awaited the Federal Reserve's announcement next Wednesday. The Dow Jones Industrial Average closed down 61.4 points, or 0.36 percent, at 16,987.51. The S&P 500 was down 11.9 points, or 0.60 percent, at 1,985.54, with energy and utilities the hardest hit as all 10 sectors closed in the red. The Nasdaq closed 24.2 points lower, or 0.53 percent, at 4,567.60. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.5. For every advancer, four declined on the New York Stock Exchange in the close, with an exchange volume of 672 million, and composite volume of 3.1 billion.

The Dow Jones Industrial Average and S&P 500 closed near 3-week lows, as energy led S&P declines for the week and the Dow recovered slightly from an earlier 110-point drop on Exxon losses. In addition to the impact of upcoming central bank news, most analysts said stocks were reacting to being overbought in the last few weeks. Despite some stalling over the last few weeks, the major stock indices remain in long-term up-trends. The S&P 500, S&P 500 Equal-Weight Index and the S&P 1500 all hit new highs in early September - and remain close to these higher. Oil is a fear asset, gold is a fear asset, and they're all coming down. The market is looking past the geopolitical risk. The lower cost of oil has both an upside and a downside. Oil acts as tax on consumer spending and an oversupply of oil is an economic stimulant, read more in The New Momentum. However this drop in oil prices is also due to a drop in demand out of China and corruption probes curb speculation and due to strategic move by Saudi Arabia to help the Untied States cut off much need revenue to the ISIS and Mr Putin in Russia.






Of course it all shows up in the charts.

Here is the price of West Texas Crude, oil is on sale!


Now lets look at our core indicators . . .


Primary Sell:

Pros Might be Getting Nervous! Don't Panic until a full turn down.


Long Term Bull Bear Lines:
 

Short term bounce complete from here we trudge up at a slower slope or sell off. This is still a bull market, just right now things are weaker.  Move from aggressive high beta to more conservative low beta investments.

NYSE High Low:
 
Deteriorating , it takes awhile for this puppy to fall off, so the down turn may be started.. 

On Balance Volume:
 
Is looking unfavorable -- Pros might be getting nervous! Don't panic yet. Move from aggressive high beta to more conservative low beta investments. 


S&P500 Percent Stocks Above 50 day MA:
 
Deteriorating, As I said last week the market can't stand when more than 80% of stocks are above the 50 day moving average and this week the weakest stocks started to sell off. Move from aggressive high beta to more conservative low beta investments.


VIX:
 
Deteriorating faster than expected, could still head down but the pros are getting nervous. 

Nasdaq Summation Index:
 
Very troubling, the NASDAQ has been the one big bright spot and it is not looking well. We are not dead yet but this is worth watching!


Aggressive Defensive:
 
Slow Stochastic is falling. Be defensive! Move from aggressive high beta to more conservative low beta investments. 


Green Arrow Graph:
 
Slope is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

Now lets look at our three lagging economy indicators, by the time these change it is too late but we can at least see what economic force got us here.

Nonfarm Payroll:
 
Looks really good, new record high.

Industrial Production:
 
Looks really good, new record high.


USA Renko Chart:
 
Looks really good, the bull shows no sign of ending soon.

What Works Now
Continue to stay defensive, that is raise cash, play safe bets like Canadian banks and Pipelines, and in the USA dividend aristocrats.


Summary 
Market is soft, be timid, don't put new money to work, raise cash and invest in conservative equities. Long term trend is up.

You can learn more about my indicators by visiting the CME4PIF school by clicking here.