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Monday, February 23, 2015

Daily update 2/23 Asset allocation data

That was a rather boring day.  Neither buyers or sellers were motivated much.  Lets have a look at SPX.

Another very narrow range day on light volume.  I mentioned early last week the slow creep up pattern may be forming.  Outside of Friday on the Greek news that has been the case.  In Dec. that slow creep up pattern ended with a splat.  That is what usually happens.  SPX came within a hair of Friday's high and turned back.  There still appears to be a lack of buying interest up here.   The pattern should persist until something comes along that motivates the sellers.  I can't predict that.  Lets see what the futures chart holds.

The ADX lines are all coming together indicating the current trend has pooped out.  We are consolidating and getting ready for the next big move. 

Since the summer of 2013 SPX has been bouncing off the 100 DMA and making slight new highs.  It then proceeds to spend varying amounts of time at the highs before falling to the 100 again.  Rinse repeat.  The only time the 100 failed to stop the decline was the ebola scare in Oct.  However, this last time it took multiple attempts to get this rally going.  The complacency that we can only go higher is so thick you can cut it with a knife.  How much higher we go and how much longer we stay above the Dec. high I do not know.  However, based on past history I will be pretty surprised if we don't end up making another dive down to the 100 that takes us below that high.  This rally does not look particularly strong to me.  The volume in some of the ETFs like IWM is extremely light.  For now I am watching SPX 2100 on the down side. 

I saw this interesting chart today from Weekly Market Summary

Here is what they said about it.

Fund managers are demonstrably more confident in the rally. Driven by Europe, fund managers surveyed by BAML now have the fourth highest allocation to global equities since the rally began six years ago. Similar instances since 2007 are highlighted (green). There has been a clear tendency for equities to struggle in the next month, or longer. The most recent similar case was in July: SPY moved sideways for a month before declining 5% in early August (chart from BAML).

While not a great market timing indicator high levels have been followed by price weakness at some point where price was lower then when the condition occurred.  The only exception to that on this chart was in mid 2013.  The market never corrected back to that level to date.  That is interesting, but that is not the only interesting thing I see in this chart.  Look at how the high allocation conditions occurred.  Every other one was preceded by a pretty strong move up that had SPX well above where it was a few months earlier.  Between the last two conditions marked in green we have essentially been in a trading range.  Price is only marginally higher then it was back in July.  When allocations were rising strongly since 2009 SPX was also moving up strongly.  Apparently the U.S. stock market is no longer the place everybody wants to be.  I would guess we are still at risk of another correction from this condition though.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.