Consumer Confidence Way Down

Friday’s University of Michigan Consumer Confidence numbers were awful.   It is now at a level generally seen during recessions.  54.9 was well below the expectation of economists who had predicted 62.  A drop this big probably means that consumers will not spend as much in the future and this is another worry for the stock market.

On the subject of the World Economy, Robert Zoelick, Chief of the World Bank said that because of Europe’s debt crisis, “In the past couple of weeks the world has moved from a troubled multispeed recovery…to a new and more dangerous phase”.  He noted that interest rates are already so low that there is no further room for central banks to move on monetary policy.  {“Mighty strong words runt”…Oops, sorry, that’s Zoelick not Zemeckis.}

The bounce is still going, but a 50% retracement back toward the previous high of 1350 would be 1237, or so, so this bounce is running out of steam.  The S&P 500 closed at 1204 today.  We’re due for a reversal soon anyway since a bounce after a big drop only seems to last 3-5 trading days.

Today the NTSM analysis dropped back to SELL and we remain out of the market per our last Sell signal. on 27 July. (See the page “How to Use the NTSM System” – the link is on the right side of this page).

I sold on the 27 July sell signal at S&P 500 - 1301 and I am defensively positioned with only a small amount of my portfolio invested in stocks. (Zero stocks in the 401k.)  Today I took a short-position of about 50% of the trading portfolio using QID (2x short the Nasdaq 100).  I may not have the top, but I believe we will eventually test the previous low of 1119 (7% below today’s close).  There is potential for a much greater drop since it looks like we may be heading into another recession that will take the market down in the range of 1050 to 825.  As always, we’ll have to wait and see.