Market Report  31 August 2014

In my Interim Report of 18 July I announced I was going into cash with my pension fund. The Dow had touched 17151 the night before, achieving 1390 out of 1439 points that I had set as a target, or 97% of the total. The original forecast was made at 15761 and called for a target of 17200.


When I came out, I spoke to a number of delegates and said that I felt the risk of the next 5% move was greater on the downside than the upside. A few days after my Market Report on 3 August, the Dow reached an intra-day low of 16333, which was 818pts or 4.8% down from the high. Another good call.


I said in the 3 August report that the Dow was now oversold, and it would need to unwind that condition. At the time it was at 16493 and went lower to that low-point of 16333, then started to move higher back to the 20 day moving average as I had forecast. I estimated it would meet it in the 16750-16800 range, and that was pretty accurate. What I didn’t anticipate was that the rally would continue and take the index virtually back to the high. That was a surprise because normally the 20ma would halt a rally after a fall of that magnitude.


Currently the Dow stands at 17098 which is more or less the level I came out at. I’ve now had a chance to look at my pension fund gain since the entry in May 2009 based on the Coppock signal, and it is 93% which naturally I am very pleased with bearing in mind that there was a significant amount in the fund already in 2009.


So, what about the market’s prospects from here? For the first time in a long time, I’m not sure. The Dow is around 300pts above its 20ma, so I certainly don’t feel like jumping back in right now, but if we start seeing more all-time highs, it’s going to be difficult not to. So I’ll stay in cash for now and will wait and see, but remember, it was always my intention to re-enter at some point as I said I didn’t believe the bull market was over.

I would prefer that re-entry to be in a couple of months at least when we will be in the Nov-Apr half of the year, but would be prepared to do it sooner if I felt the evidence was strong enough. Here’s the chart, clearly showing that the bull market is still intact:$INDU,PMUBDANCBO[P][D20140830][F1!3!100.0!!2!20]&pref=G


Four weeks ago the S&P500 was at 1925 and it has risen to 2003 which is an all-time high. The chart continues to be incredibly consistent, with no sign of a major trend change:$SPX,PMUBDANCBO[P][D20140830][F1!3!20.0!!2!20]&pref=G


As I said last month and on other ocassions, the S&P has been out-performing the Dow for a few years now, so it is not surprising that it gets more overbought than the Dow on the upswings. Currently the S&P has an extension above the 20ma of 2.1% compared with 1.8% for the Dow, and its 7-day RSI stands at 76 compared with the Dow’s 71. These are not extreme figures on the S&P, but something to keep in mind as another move up from here could take the RSI past 80.



(c) Robert Newgrosh 2014


All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission in writing of the author.  (So please do not forward it to anyone else)

Aug 31, 2014