A blog post

Market Closes Mixed for Second Week in a Row

Posted on the 16 May, 2014 at 4:37 pm Written by in Blog

comp May 16 2014

Market Review

The market meandered again this past week with a positive opening on Monday followed by hesitation and a downward drift until a slight recovery Friday afternoon.

The blue-chip DJIA and S&P 500 made new 2014 highs on Tuesday while the NASDAQ Composite continued to falter.  This bifurcated market performance indicates that the vast majority of underlying securities are not advancing while selective defensive and high-quality stocks are moving higher.  Moreover the number of new NYSE 52-week highs continues to languish below 360, well below previous levels when the market was near its prior highs.

For the week, the DJIA fell 0.55%.  On the other hand the NASDAQ Composite gained 0.46% for the week followed by the S&P 500 which lost only 0.0.03%.  Many technology, momentum and social media stocks again experienced high volatility, some having dropped 20-30% or more since the beginning of the year.

The NASDAQ was again not able to hold above critical support/resistance at 4100 which it had surpassed on Tuesday and closed at 4090.87.  Next support is at 4000.  This index is 84.36 points below its 100-dma now.  It is also below its 50-dma.  The other two major indexes are above these two moving averages.

For the year-to-date, the NASDAQ is down 2.04%, the S&P is up 1.60%, and the DJIA is down 0.51%. In comparison, the BDH portfolio is up 4.55% this year, and currently in a 100% cash position. 

Gold (GLD) had a mixed week with no real movement.  Most bonds rallied further and hit yearly highs this past week showing much better yearly performance than the stock market averages. Please type in ETF ticker symbols IEF, TLT, BOND, SHY or AGG or others one at a time to see their current week’s performance after pulling up the NASDAQ Composite chart.

NASI May 15 2014

Indicator Review – No Changes

Indicator #2 NASDAQ Composite Index and 100-dma.  This indicator is on a SELL signal and about 85 points away crossing over the 100-dma. (Refer to first chart). 

Indicator #5 NASDAQ Composite with MACD.  This indicator had a clear-cut MACD crossover BUY on April 22nd but is again near to a negative crossover which will occur early next week if the Index declines further.(Refer to first chart again and the blue arrow

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage.  The latest May 12th bullish percentage reading was 33.1% which was higher than the May 7th  bullish percentage reading of 28.3%.  Investors are now more bullish going out six-months into the future.   This indicator remains on its SELL signal.  Remember that a decline below 25% and a subsequent rise above that level in a future week will generate a BUY signal.

Indicator #8 NASI Summation Index and MACD.  The index crossed above its 5-day ema (see blue arrow) on April 22 and below it on April 25. The MACD indicator is flat lining the past week with no trend forming.  So the sell signal on this indicator remains in effect. (Refer to the second chart and the arrows indicating the two crossover areas.)

A chart of the buy and sell signals is presented here, but may not be updated yet:


Dashboard on “1” SELL Signal

The latest update is shown here:

 Dashboard-V2-May 16 , 2014

Dark Liquidity BDH Performance Statistics

www.dark-liquidity.com/BDHV2new.php independently tracks the BDH performance. So far year-to-date the BDH portfolio is up4.55% compared an average lossof 0.30% the three major averages.

Top 5 ETFs – 100% In Cash

Note that on the etfscreen.com/buydonthold Decision page that the number of ETFs with a “pass” rating is now at 10 out of 42 compared to 11 in the prior week.  These low readings clearly illustrate the market’s internal weakness even though two of three major averages hit new highs on Tuesday.

Conclusion – Market Meanders Again

The market performance was mixed again last week indicating a range-bound market.  Be patient and wait for the next BUY signal.  Keep in mind that we are now in the May-October seasonal period which historically has been the weakest market 6-month period going back to 1950.  There is no guarantee that the market will decline this year, but historical perspectives are important to keep in mind when investing. This does not mean the market will definitely correct here, but the odds, based on seasonal patterns, favor it.  Using a mechanical system like the BDH strategy will keep us on the right side of the market, no matter which way it decides to go. The BDH strategy has been 100% in cash since March 19th and has avoided the market’s roller-coaster ride. So stay in cash and bonds until the next BUY signal occurs.  This is a dangerous market, as it is way overdue for a 10% or more correction.  Many high-flying stocks have already corrected by more than 20% while the rest of the market has not yet experienced that magnitude of decline.


some comments

There are currently 2 of them
  1. Gene Howe 18 May 2014 at 10:37 am permalink

    Hello Les,

    The best performing ETF in the BDH portfolio is currently EPI, with a 32.5% gain for the last 3 months and +20% gain since the mid March BDH sell signal. This ETF is currently the number 1 ETF and has a buy rating but cannot be bought until a buy signal occurs.

    Since all of the BDH indicators except indicator 6 are based on Nasdaq performance, does an ETF consisting only of India stocks, or any foreign country(s) stocks for that matter correlate with BDH buy and sell signals? In other words, are non US stock ETF’s affected in the same manner as US stocks by the BDH indicators?



    • Les Masonson 18 May 2014 at 2:09 pm permalink

      Hi Gene,

      Thanks for your good question. In general, and in the past, the foreign and US markets had about a 75% correlation (my estimate). And when the US market was moving up many foreign ETFs were moving up at a much faster pace, as was the case when I wrote the book. Recently, in 2013 the US market has outpaced the foreign ETFs. EPI moved in the same pattern as the NASDAQ Composite until 2013 when it spurted up at a much faster pace and direction. Here is comparison of the two on stockcharts:http://stockcharts.com/freecharts/perf.php?$COMPQ,epi
      In 2014 a number of foreign ETFs have done much better or much worse than the NASDAQ Composite. Keep in mind that the BDH indicators were developed using only US ETFs. Foreign ETFs have risen to the top of the rankings and sank over time. In general the BDH strategy can be used with the foreign ETFs with less precision. Also you should note that EPI has much more volatility than the NASDAQ index and the risks are higher.