OMG! COAC! (Correction Over, All Clear)

The S&P 500 was up 4.3% today to 1245 on nearly twice its average monthly volume.  VIX fell over 9%.  A beautiful sight, we’re happy tonight, walking in a winter wonderland…

I almost posted about this last night.  The correction that we were in lasted 17-1/2 weeks.  The last significant correction we had ended in August of 2010 and it lasted…17-1/2 weeks.  Today’s rally started Monday as a technical response to the final low (see chart below) on the Wednesday before Thanksgiving and the Friday after.

We set sail for huge gains today when the Fed announced that the World’s Central Banks got together and agreed to make low interest loans to European Banks.  The last time the Central Banks got together was in 2008; the market was up 6% that day…it crashed later in the year and into 2009.  Do we have a crash coming?  Probably, but I sure don’t know when.

NTMS is BUY today; no surprise there. 

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio. 

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

Consumer Confidence Up today – November 29, 2011

The Conference Board reported today, Tuesday that the Consumer Confidence Index was 56.0 in November.  That is up from the previous month’s value of 40.9 and it is the highest since July.  According to Briefing.com, Economists were expecting a reading of 42.5.

Frankly, this is an amazing number because Consumer Confidence often tracks the stock market and the stock market was down the entire month of November.  I see this as bullish for the market.

Keep in mind that most of what NTSM does is analyze technical indicators in the market (Sentiment, Price, Volume & VIX).  Bad news can trump technicals most anytime and the European situation may not have a solution that is neat and tidy.  A break-up of the Euro or European Bank failures could upset our markets at any time.  Further, Euro recession seems almost certain and that could hurt earnings here.  

In a Wall Street Journal article (WSJ) Saturday, Tim Smith of Maersk lines (a shipping company - real ships, as in containers) said “Almost all carriers are losing money now…and it looks like 2012 will be similarly challenging.”  The article said the problem was the “weak Europe-Asia” route. Mr. Smith said “The US looks a little better, but it’s difficult to call.”   Shipping can be a “canary in the coal mine” for the world’s economy.  So as we’ve noted before, it looks like Europe will be in recession soon if it isn’t already there.

OK…enough speculation; we just need to be wary and ready to sell if the music stops.

I commented earlier that those in the TSP (the Government’s 401k) might consider investing in the S-fund after the 3 October bottom.  The S-fund tracks the Wilshire 4500.  Small caps tend to outperform large caps after a recession.  Since the market priced-in a potential recession in the recent correction, the S-fund has been outperforming the C-fund (S&P 500).  Since the 3 October low, the S-fund (Wilshire 4500) has outperformed the C-fund (S&P 500) by about 7% as of yesterday’s close. 

The S&P 500 contains 13% financials and derives significant income from overseas.  Both of these factors make the S&P 500 more susceptible to problems in Europe so I plan to stay invested in the S-fund.  The US isn’t looking like recession yet, but problems in Europe might cause problems for our fragile economy.  If that happens, the S-fund won’t be a safe haven, but perhaps it will hold up longer than the S&P and I’ll come out slightly ahead before I sell (assuming the NTSM system generates a sell).

Closing volume data wasn’t available (as of this post) but that won’t matter today: NTMS is HOLD again.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio. 

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.

Big Bounce today

The S&P 500 was up almost 3% today while the VIX fell 7%.  The S&P was up only 2-days in the last 10 so it was overdue for a bounce.  

Volumes have been declining during the downturn since the end of October.  To me, that indicates that, at worst, the downturn (if it continues) will be a re-test of the prior low.  If the S&P 500 declines to 1099, I expect that the market will move up from there.  It is quite possible that we might not get down as low as 1099 again. 

If the S&P 500 was heading down toward a new low, volumes would have been increasing as more investors started selling.  At best?  Some are suggesting that today was the beginning of the Santa Clause rally.  That may be a bit premature, but I am still reasonably bullish in the sense I think that the S&P 500 will be higher before year end.  1275 by year end is not impossible. 

NTMS is HOLD.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio. 

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

Futures Up over 2% - Sunday night

Officially the NTSM computer system is a HOLD as of Fridays’ close.

Futures are up over 2% as of 8:45pm Friday night, so the options market is betting on a good day tomorrow.  I would expect a strong day Monday based on the good reports from retail sales on Black Friday.   

The market experienced a big downturn reversal that started 28 October after the bottom on 3 October.  I have mentioned before that a weakness of NTSM is when the market experiences a quick change in direction.  I would say that the downturn after a major bottom a month earlier qualifies as a quick turnaround so the NTMS analysis has not given us a sell signal that might have otherwise occurred.   That still may turn out to be the best choice, though.  As always, we’ll have to wait and see.

NTMS is HOLD.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio. 

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.

Volume Down Again – and so were the Markets

I may not post over the weekend since things  will be busy with Holiday family visitors.

The S&P 500 was down 2.2% to 1162 Wednesday and the VIX rose to 34 up 6%.

A German Bond auction went poorly with fewer buyers than expected and yields rose.  Germany is the safe haven economy and the strongest of the Euro zone countries…supposedly.  So this development is not good news.  In fact, I think it is VERY bad news.

Sentiment is oddly high considering that the S&P is falling fast.  The 5-day sentiment indicator is 59%-bulls as of yesterday’s close.

The VIX indicator is stuck in a relatively high range and isn’t generating a sell signal that would get me out of this mess.  I’ll be taking a look at the indicator to adjust it for specialized conditions.  It is going to take some work and then back testing so I don’t expect it to help make a decision in this downturn.

Volume fell again today and was about 80% of the 20-dMA of volume on the NYSE (pre-Holiday).  At this point that doesn’t mean much since we are on the way to a re-test of the 1099 closing low we had on 3 October. 

I considered selling today, but it was late and the web site guidance was confusing.  It looked like a sell request wouldn’t be processed until Friday night because of the Holiday.  If that was the case, why not wait and decide on Friday?

As of today the NTSM system is up 3.5% on the year.  The S&P 500 is down 8%

NTMS is HOLD.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio.  Since the trading portfolio is in the QQQ this time, I’ll sell it when we get a buy indication and buy a 2xETF.   That way I can take a tax loss and with a 2x fund be better off as the market recovers.

HAVE A GREAT THANKSGIVING!

Down Again and waiting for a turn-around

The S&P 500 was down 0.4% to 1188 Tuesday.

We just can’t catch a break on the news.  GDP was revised down to 2.0 from its previously reported value of 2.3%.  It still shows a good progression, but Sam Stovall said that in all previous times that GDP has been 2% or less for 2-successive quarter the US has slipped into recession.  Perhaps, but the news was not all bad.  I heard some more detailed analysis on PBS.  The downward revision was due to companies reducing their inventories and the commentator said that and that would likely be seen as a positive in the next quarter or two as businesses build back inventories.

Consumer spending is up so those who claim the inventory declines are bad news (and in some cases they are) will likely not be right this time around.

The S&P 500 is 2.5% below 1218, its level on 1 November.  Volume has continued to fall at each close around that level and market internals have been rising.  To me it looks like the S&P should be moving up soon; still, the odds now are pretty good that we’ll see the S&P 500 test the 1099 level again.  The only way to avoid that outcome is for the bleeding to stop now.

The Navigate the Stock Market analysis is still HOLD.    

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio.  I am over-committed (maybe I should be committed) considering that bad news.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

Super Committee Fails – Is anyone surprised?

Monday the S&P 500 fell nearly 2% and VIX rose about 3%.

Monday was another relatively low-volume day on the NYSE, but then, my volume analysis has proved to be worthless recently, proving once again that is possible to keep going down on low volume.

It will be a while before we find out if the NTSM analysis is right or wrong.   I developed this computer model was to avoid losses greater than 10%.  If the system is set to respond to every little downturn, I’d be day-trading the retirement portfolio and that is not the goal here; however, I will be looking at the NTSM VIX indicator to see if there are ways to improve the system.

In the mean time, VIX is still not rising fast enough to issue a sell signal.  VIX needs to get up around 38 to generate a sell signal.

Many reported that the losses today were the result of the Failed Super Committee negotiations.  That’s an odd conclusion; the Super Committee had not met as a group since 1 November so there was very little hope that a group of intractable ideologues, appointed by other intractable ideologues, would succeed.

The good news?  The Bush tax cuts expire in 2-years and there will be 100-Billion in cuts each year for the next 10-years as a result of the previously passed legislation so the deficit will improve in the future unless our incompetent Politicians backtrack again.

NTSM was HOLD Monday.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio.  I am over-committed (maybe I should be committed) considering that bad news keeps coming.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

The stock market may be better than it looks…

Today the S&P 500 closed at 1216, within a whisker of where it closed yesterday.  

Here’s an interesting (sobering?) chart.  It shows the S&P 500 since 1980.   From 1980 until 1995 the curve shows a very even climb.  It goes parabolic starting in 1995 and ended in 2000 when the dot-come bubble popped.  The curve from 1980 until 1995 shows a reasonable and sustainable rate of growth.  If that rate had been sustained, does the arrow point to a level of reasonable valuation today (about 825 on the S&P 500)?  I don’t know, but that is one reason why many think the stock market is way overvalued today.  I think it is very possible we will trade back to the 825 area at some point over the next 10-years; we just don’t know when, or if it will.

Today, Friday was an interesting day.  The S&P 500 closed unchanged, but the advancing stocks outpaced decliners with 57% of all stocks advancing.  It just wasn’t 57% of the S&P 500.  That’s a good sign, because the market is improving; we just haven’t seen the evidence in the broader indices.

In the past month the S&P 500 has closed at, or between, 1216 and 1229 four times at its lows.  The first was on 1 November.  Since then the other three times have all been on lower volume (and declining each time) with improving breadth (%-advancing).  This too is a good sign and it also indicates the market is improving behind-the-scenes.

Thursday we were worried about the VIX rising, but Friday VIX (S&P) fell 7%.  Again, the market is improving. 

All this leads me to conclude I was right to stay in the market with cautious optimism. If I am right, we should see the market move up soon.

The NTSM analysis remains HOLD today.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio.  I am probably over-committed (maybe I should be committed) considering all the bad news out there.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.

Willem Buiter, Citi Bank Chief Economist – “they have to act now”

The NTMS computer model is deteriorating towards a sell, and that could happen tomorrow if the VIX (S&P) climbs a little more than 20%.  Is there anything out there that could drive the VIX to new heights soon?  Europe.

Citi's Chief Economist, Willem Buiter, said this morning on Bloomberg TV that, "time is running out fast." He said further: " I think we have maybe a few months -- it could be weeks, it could be days -- before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it. So they have to act now."  Read the full article at: http://www.zerohedge.com/news/willem-buiter-spanish-or-italian-default-could-happen-few-short-days

Yesterday’s WSJ headline was “Turmoil Spreads in Europe” and that may have had more to do with yesterday’s selloff than anything else.   Bond yields rose for many of the non-crisis countries.  That coupled with a report Tuesday that Europe grew little if at all last quarter means Europe is probably headed into recession.  All of this adds more worries to an already troubled Europe and threatens the US recovery.

Today’s volume was 76% of the 1 Nov volume (when we had a short-term bottom of 1218) and market internals improved too over the 1 Nov data.  So today might be considered a successful test of the prior low, but this sort of analysis is a bit questionable for small downturns; none-the-less, I think we go up tomorrow based on market technicals. If not, tomorrow could be very ugly because we broke the lower trend line today.  Unfortunately, the market is reacting to news.  When a market becomes news driven, technicals don’t mean much.

The NTSM analysis remains HOLD today.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio.  I am probably over-committed (maybe I should be committed) considering all the bad news out there.

Symetrical-triangle-pattern & other nonsense (free stock market advice)

The S&P 500 was down 1.7% to 1237 Wednesday.

Depending on which article you read (or listened to) the reason for today’s poor showing was the Euro zone financial crisis or a Fitch news release (Fitch is a rating agency) that said, unless Europe got its act together soon Fitch was going to downgrade the US Banks.  Are they (Fitch) kidding us?!  Did someone really think that news was new?  Well, apparently some did because Morgan Stanley was down 8% and most of that came late in the day after the Fitch news.  This sent the charts of the major indices careening down to the bottom trend line.

I don’t follow charts much.  The chartists have names for a myriad of chart patterns and each pattern means something.   It just doesn’t mean much to me; but we can look at the basic charts and see where we are in “the channel”.  Stocks tend to move in a saw-tooth pattern while remaining in a channel. As an example, here’s a chart of the last 3-months from Yahoo financial:

The bottom of the channel is well defined with 4-points over several weeks.   From my perspective, if I have only one point on the top; and that point happens to be statistically significant (by NTSM methods); and the trend is short, I tend to put the top of the channel at about 5% above the bottom channel.   The importance of the channel is that as long as we remain above the bottom channel line, the uptrend remains in effect. 

The chartists draw the red, dashed-line as the upper channel line and this creates a “symmetrical-triangle-pattern”.  It’s symmetrical because the pattern is neither going up nor going down.   This pattern indicates confusion in the market (they say) and may break either way.   

My guess is that the bottom-channel will hold and the S&P 500 will either move up tomorrow, or be down enough to shake out the non-believers before we move up again in the next couple of days. 

So in this case, chartist or not, we don’t want to continue down or the bottom trend line will be breached and the trend is then considered down.  To call a trend-change the drop needs to e convincing, say 1 to 3% below where we are now.  All we can do is wait.

The NTSM analysis remains HOLD today.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 90% long in the trading portfolio – up slightly because I bought some more on the dip today.  I am probably over-committed (maybe I should be committed) considering all the bad news out there.

U.S. Government Spends 25% of GDP – NTSM / Free stock market advice

Tuesday, the S&P 500 was up ½% to 1258.

Here’s an interesting chart presented by Business Insider in a long presentation regarding the world’s economy.  Bottom line, the world economy is shaky and leaning toward recession.  (I’ll present more charts later in the week.)

http://www.businessinsider.com/naufal-sanaullah-market-overview-2011-11

It was presented by Naufall Sanaullah of Shadow Capitalism http://naufalsanaullah.wordpress.com/

Chart originally from Street Alive.com

The chart states that more than 25% of personal income is made up of Government support.  That is another way of saying that the Government is now more than 25% of GDP and we have reported that several times here.  When Bill Clinton balanced the budget the Government was only 17% of GDP. 

The importance to the economy is that as Government reduces spending, we may slip into recession.  The good news, so to speak, is that the experts don’t expect anything as deep as the last one.  Frankly, the experts have little clue and neither do I; there is no point in guessing.  I’d prefer to follow the NTSM analysis.  

As of today, Tuesday, the S&P 500 is exactly flat on the year; NTSM is up 12% (excluding the trading portfolio).

The NTSM analysis remains HOLD today.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 80% long in the trading portfolio – up slightly because I bought some on the dip 2-days ago. 

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

More Free Stock Market Advice

More Free Stock Market Advice

I commented shortly after the 3 Oct bottom that Government employees in the Government retirement system (TSP) might consider investing in the S-fund (small cap fund) rather than the C-fund (the S&P 500) after a major recession scare.  Smaller cap funds do better after recessions even imagined ones.  NTSM has a fair number of Government employee followers.

The S-fund is actually an “all-the-rest” fund since it tracks the Wilshire 4500.  That is pretty much all stocks other than the S&P 500.  The TR Price Extended Equity Market Index tracks the same stocks as the S-fund.

The following chart shows the TR Price Extended Equity Market Index (S-fund, blue) vs. the S&P 500 (red) since the 3 October bottom.

The Official TSP website agrees since it shows that as of Thursday the S-fund is beating the C-fund by 5%. (TSP was closed Friday when I ran these numbers for Veterans Day.)

In troubled times, there is often a “flight-to-safety” i.e., bigger cap stocks, so I’ll probably switch over to the C-fund at the end of November.  A move on the last day of the month still preserves 3-moves for December, since TSP rules do not allow more than 3-changes per month.   A case can be made that smaller cap stocks have less exposure to Europe and may continue to outperform the  S&P 500, so it’s kind of a guess which way to go.

Now the Bond Ghouls are after Italy as bond yields climb precipitously; suddenly Greece is forgotten.  Italy is a big economy so it is very important to Europe.  We’ll watch the drama unfold.

The NTSM system is HOLD today, so it’s no-change.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 80% long in the trading portfolio – up slightly from last week.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.

New recession threatens the globe as debt crisis grows - The Telegraph

The S&P 500 was up 2% Friday to 1264. VIX (S&P) dropped 8%.

The Telegraph (London) Friday, 11/11/11 -

“The OECD's index of leading indicators for China, India, Brazil, Canada, Britain and the Eurozone have all tipped below the warning line of 100, with the pace of the decline in Europe exceeding the onset of the Great Contraction in early 2008.

Professor Simon Johnson, a former chief economist at the IMF, rattled nerves earlier this week by warning the world is "looking straight into the face of a great depression".

Full article at http://www.telegraph.co.uk/finance/financialcrisis/8882524/New-recession-threatens-the-globe-as-debt-crisis-grows.html

I’m sure we’ll be hearing more than we would ever want to hear about this in the future.  

For now, I’ll be on alert and ready to bail out of the stock market again if necessary.

Keep in mind that we are in a Secular (long-term) Bear Market that started with the dot-com bubble that popped in March of 2000.  I expect this bear market to last 20-years so it would be natural for us to experience more than one recession during the bear market.  We can’t know when the market may start to further discount prices in advance of a recession.  As Yogi didn’t say, “It’s hard to make predictions, especially about the future.”  (Markus Ronner 1918)

For now, US profits have been OK and the NTSM market analysis is signaling HOLD.

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 75% long in the trading portfolio.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk. 

Still Bullish

The S&P 500 was up nearly 1% to 1240; VIX(S&P) pulled back 9% on Thursday.

We bounced from the bottom trend line and that’s a good too.  Had we broken down convincingly, things could have gotten bad in a hurry.  As it turned out, the market looks OK;  not great, but OK.

If the VIX can pull back some, I’ll be a lot more optimistic. 

The Navigate the Stock Market analysis is HOLD today.   

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 75% long in the trading portfolio.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.  Bad news in Europe could send the markets down in a hurry.

Maybe, John Hussman, PhD was right?

S&P 500 was down 3.7% and VIX(S&P) rose over 30% today, Wednesday.

The interest on Italy’s debt (as driven by 10-yr bond yields) rose above 7% today and traders decided that Armageddon is here, again.   I don’t know…the bond ghouls are driving the train and you have to wonder whether the market is being manipulated.  Could our enemies be trying to bring down the west?  Perhaps it’s just a result of the buy-your-vote Politicians over-spending.   Well, enough paranoid musing...

Speaking of mental illness, my writings have been schizophrenic recently.  I agree with John Hussman that recession is likely, but even so, I still remain bullish until proven otherwise. 

The Navigate the Stock Market analysis took a big hit today, but it did not issue a sell. 

a.    Sentiment is neutral.

b.    Price is neutral.

c.     Volume is neutral, but just barely.  Volume was about average today so, in spite of the big %-move down in price, this was not a typical panic.  Perhaps it was just nerves; BUT, any more significant selling and the associated down volume will push the NTSM analysis to a sell.

d.    VIX(S&P), our best indicator, switched to sell today.

 Overall the NTSM system is HOLD.

I commented last week that we could see a drop to 1225 on the S&P 500; I certainly didn’t expect that to happen in one-day!

So here we are.  The S&P 500 fell to its bottom trend line so it has not yet confirmed a break of the up-trend that has been in play since 3-October.  So yes, I am still bullish, though cautiously so and further selling will crush that tenuous optimism in a hurry.

I remain fully invested, but I will watch the NTSM analysis and act accordingly.  NTSM is based on closing data and I have gotten burned in the past when I acted on “projected” closing data, so it is likely I’ll have to wait ‘till tomorrow evening depending on the market action.  If it looks like I can make a call before the close, I’ll post during the day.

If I do have to sell, I can do that fairly easily by going to 100% cash in the 401k.  It’s one fund, so one-click will get me to a 30% long position.  I think leaving 30% invested is OK, because if selling turns out to be a wrong call, I still have 30% invested.  If the market get’s clobbered, a 30% position would only give me a 15% loss in the portfolio if the market is cut in half.

QUICK POST

I am on the road today without time to run the Navigate the Stock Market model.  It is clear from the market action {higher closing price, decent volume & lower VIX} that the NTSM system would not be sell today.  Sentiment has been rising into the caution zone, but it is not a sell yet.  Even if it were, it takes more than one indicator to give a sell signal.

NTSM is either BUY or HOLD so I remain fully invested.

Cyclical Index Gives a Positive View on the Market

The S&P 500 was 1261 today, Monday, up 0.6%.

John Hussman, PhD, commented today:  “...in the U.S., our broadest models (both ensembles and probit models) continue to imply a probability of oncoming recession near 100%. It's important to recognize, though, that there is such a uniformity of recession warnings here (in ECRI head Lakshman Achuthan's words, a "contagion") that even an unsophisticated, unweighted average of evidence indicates a very high likelihood of recession.

... In our view, investors should presently hold risky assets only in the amount they would be willing to hold through the duration of significant downturn, - John Hussman, PhD, 7 Nov 2011,Weekly Market Comment, from http://www.hussmanfunds.com/wmc/wmc111107.htm

The market doesn’t seem to agree with Mr. Hussman, especially because the Morgan Stanley cyclical index is outperforming the S&P 500 since the recent October bottom.  Mr. Hussman’s comments are cause for concern though; I have great respect for his rigorous analytical approach to the markets. 

The blue line is the Morgan Stanley Cyclical Index.  The red line is the S&P 500.

I suspect Mr. Hussman is right.  The difficulty is in the timing, and that relates to my favorite investing saying: Trade what you see not what you think.  I think Mr. Hussman is right, but market action suggests we have further gains ahead.  Market action can change quickly, however, so the trick will be to be ready to sell when market conditions change.   

The Navigate the Stock Market analysis may not give us a sell signal at the high, but we can hope that it will be close enough to the high to insulate us from extreme losses that may come with a recession.   

A strategy to deal with conflicting recommendations is to split the difference – i.e., cut your normally invested stock-position in half until there is more certainty in the market.

One argument for remaining fully invested, at least for the short term, is that many stocks have already been priced for recession.  The Morgan Stanley Cyclical Index is still 19% below its high in March.  Manitowoc, the construction crane company and our poster-child for recession, is still down 75% from its high this year and that is after its price doubled from the 3 October low.  Clearly, the market is still concerned about recession.  It really comes down to one question: Was Ben Bernanke right last week when he said we will have slow growth, but no recession?  Depending on your answer, invest accordingly.

The NTSM analysis is HOLD as of the close on Monday. 

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 75% long in the trading portfolio.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.  Bad news in Europe could send the markets down in a hurry.

How High Can the Stock Market Go?

The S&P 500 was down about 0.6% to 1253 on Friday and the VIX was down 1.1%...a good sign, although VIX is still stubbornly above 30. 

The S&P 500 remains in a Secular Bear market until it takes out the old highs around 1550.  I don’t think we’ll get that far, but who knows?  This bear market that began in March of 2000 is likely to last 20-years.

As I noted in Thursday’s blog, a 29% climb from the bottom is the lowest rise in past history after a cyclical bottom (at least when records were available), and that would take the S&P 500 to around 1420.  That seems doable, assuming we don’t get overtaken by bad news somewhere down the road.  In the near term, we tested the 1100 area just a few weeks ago and the S&P 500 is unlikely to go there again anytime soon, but of course, there are no absolutes in this game.  My guess is that we’ll see a bounce if we get down as far as 1225 this week and we’ll probably bounce sooner.  

The NTSM analysis remains BUY as of the close on Friday. 

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 75% long in the trading portfolio.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.  Bad news in Europe could send the markets down in a hurry.

Famous Stock Market Quotes: “No. No. That's not true. That's impossible!”

But it seems to be true; we are in a bull phase.

To review, here are the reasons why I think we saw a major bottom on the 3^rd of October.

10-yr bond yields are rising again after bottoming at depression levels.

Breadth hit extreme low limits at the bottom – as low as the 2009 recession bottom.

Sentiment hit extreme low limits around the bottom.

The market was up 7-days out of 9-days after we made the 1099 low.

VIX fell more than 40% after the low of 1099 (although it has come back some).

The market was up more than 1.75%, 3-days in a row after the low – that has only happened after major lows.

Cyclical stocks outperformed the S&P 500 after the low.

The S&P 500 broke the old high of 1219 on 31 August and that got the S&P out of its trading range.

Volume was strong in the afternoons after the low; that is when the institutional boys move and that is also considered smart money.

All of these are indicators that 1099 was a major low. Bottom line: the market should continue to surprise to the upside.  

For Historical comparisons we have the following:

The market rebounded for 24-months from 1974-1976 climbing 73% to be followed by a 19% decline that took place over 17-months.

From 2009 to April 2011 the market rebounded for 14-months climbing 78% to be followed by a 19% decline that took place over 5-months.  After the 1932-1932 bull-run there was a 23% drop in only 6-months so the short time for a bear market has precedence.

Historically, the smallest increase in the next Bull phase following a bear cycle was 29% in 1911-1912.  That would carry us to about 1420.  The shortest bull-cycle was 7-months in 1938;

The average Bull-return has been102%, lasting on average, 26-months.  That would carry us above 2200…Time for another famous stock market quote:  “No. No. That's not true. That's impossible!”   To which I reply, “Search your feelings; the high won’t be above 1550.”

The NTSM analysis switched back to BUY today, Thursday. 

I bought back into the stock market at S&P 500 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I moved up to 75% long in the trading portfolio.

Bernanke: No recession, but very slow growth

The S&P 500 moved up to 1238, a 1.6% gain for the day, Wednesday.

I’ve written on several occasions about the Shiller P/E-10.

From the Motley Fool at http://www.fool.com/investing/general/2011/10/31/5-things-that-should-spook-investors.aspx we get the following:

“The P/E-10, a price-to-earnings ratio that uses average earnings over the prior 10-year period…(is)…flashing red right now: Based on Friday's closing price of 1,285.09, the S&P 500 index has a P/E10 equal to 21.6 By comparison with the indicator's long-term average, that suggests stocks are roughly 30% overvalued.”

So we have that bit of bad-news analysis, the continuing European saga, and John Hussman’s weekly comment (yesterday’s blog), to remind us things aren’t all that great.

Today we saw a slightly better than expected ADP employment report and we heard Bernanke’s comment that we were getting past the slow patch in the economy, but we would see a slow economy for years to come.  Hmmm…the good news seems pretty lame.

The one thing in our favor is that the market assesses news and prices stocks accordingly.  The 3 October 1099-bottom (on the S&P 500) still looks like a significant major bottom in this cycle of the bear market.

I commented about 2-weeks ago we could see and 5% pullback and that is about what we had.  That is typical 3 to 4-weeks into a rally off a major bottom.

The NTSM indicators of Sentiment, Price, Volume, and VIX are all hold.

Overall, the NTSM analysis is HOLD today, Wednesday. 

I bought back into the stock market at S&P 500 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 50% long in the trading portfolio.

Greek Vote/ ISM Numbers/ John Hussman/ Uh-oh…

“Greek vote rattles world markets”…Uh-oh…

from (CNNMoney) – “Investors around the world reacted badly to news that Greek voters will get to hold a national referendum on the recent bailout deal...Bank stocks around the globe were hit particularly hard in trading Tuesday…Gary Jenkins, head of fixed income, at Evolution Securities…said “European traders are rightly worried that the continent's financial system could be on the precipice of a complete meltdown.  "What happens next is a complete unknown and unknowns are not liked by the market," he said. "It raises the chances of a disorderly Greek default, and the one thing they were trying to avoid was a disorderly default." – From http://money.cnn.com/2011/11/01/markets/world_markets/index.htm?iid=HP_Highlight

 

The ISM numbers…Uh-oh…

The Institute for Supply Management (ISM) numbers dropped to 50.8 from 51.6 last month. Economists had expected it to be 52.  A reading below 50 indicates expansion.

John Hussman, PhD…Uh-oh…

Paraphrasing Mr. Hussman:  For the simple set of conditions when ECRI Weekly Leading Index growth rate is less than -7; ISM Purchasing Managers Index< is less than 52; and the S&P 500 was below its level of 6-months earlier the economy…has been in recession within 13 weeks, 100% of the time (at least for every post-war recession for which data is available). “This is the combination, incidentally, that we observe today.”

Regarding the stock market Mr. Hussman said, “The overall ensemble of evidence places the current market among a set of historical counterparts that is best characterized as a "whipsaw trap" - an overbought rally in an unfavorable overall Market Climate, about 70% of instances which fail to follow through.” - from John Hussman, PhD, Weekly Market Comment (1 Nov 2011) The full article at http://www.hussman.net/wmc/wmc111031.htm  is highly recommended. 

As Mr. Hussman often points out, an “unfavorable climate” doesn’t necessarily mean we can’t have good short-term returns in the stock-market.

I moved 50% of the trading portfolio to Long using the QQQ ETF based on 3-items: (1) the NTSM recent BUY recommendation; (2) we were due for a pullback after the straight up move since 3 Oct; (3) big down days are often followed by upward movement.  That’s a nervous trade that I will dump quickly if we don’t see some upward follow-thru.

It is hard to buy when everyone else is selling, but as noted by my actions, I am still Bullish. We’ll see.

The NTSM analysis dropped to HOLD today. 

(If the S&P continues down, NTSM analysis will switch to a sell – perhaps in a few days.  It may just as well turn up and I prefer not to try and guess the market or the NTSM system.  Unfortunately, the NTSM system is not good in a quick market turn-around.)

I bought back into the stock market at S&P 500 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.).

I am now 50% long in the trading portfolio using QQQ (no 2x-ETF this time to limit some risk).

(See the page “How to Use the NTSM System” – the link is on the right side of this page).