RICHARD RUSSELL:
"A primary bear market has been signaled according to Dow Theory. On May 1 the Dow Industrials rose to a high of 13,279.32. The Transports failed by a wide margin to confirm. The two Averages then turned down and broke below their April lows. Under Dow Theory, this was confirmation that a primary bear market is in progress."
IS THE BEAR AROUND THE CORNER?
"A primary bear market has been signaled according to Dow Theory. On May 1 the Dow Industrials rose to a high of 13,279.32. The Transports failed by a wide margin to confirm. The two Averages then turned down and broke below their April lows. Under Dow Theory, this was confirmation that a primary bear market is in progress."
IS THE BEAR AROUND THE CORNER?
By Jon D. Markman: "...it certainly
looks as if institutional investors are hunkering down for a bear market and
recession...For
the last four months, year-over-year growth in real personal income (i.e.,
income growth rate minus annualized inflation rate) has stayed lower than it
was at the beginning of each of the last 10 recessions, according to
Lakshman Achuthan, managing director of the Economic Cycle Research Institute...Achuthan
notes that personal income growth has never remained this low for four months
without the economy going into recession. At least in the last 60 years."
NY
TIMES: "Greece Warns of Going Broke as Tax
Proceeds Dry Up (ATHENS) — As
European leaders grapple with how to preserve their monetary union, Greece is
rapidly running out of money. Government
coffers could be empty as soon as July, shortly after this month’s pivotal
elections. In the worst case, Athens might have to temporarily stop paying for
salaries and pensions, along with imports of fuel, food and pharmaceuticals... Income expected from a higher, 23 percent value-added tax
required by the bailout agreement has fallen short by around 800 million euros
in the first four months of 2012. That is partly because cash-short businesses
that were once law-abiding have started hiding money to stay afloat, tax
officials said."
(Spain
in trouble too)..."A top Spanish official acknowledged on
Tuesday that Spain could not readily return to the markets to raise money
because investors are demanding such high rates, highlighting how the debt crisis
is spreading to larger economies in Europe."
CNN/Money: Stocks rally on hopes for
Europe
"All of a sudden we've realized there's a
lot of optimism from rumors that there will be some type of stimulus coming
really soon," said Ryan Detrick, senior technical strategist at
Schaeffer's Investment Research. "This might light the fuse and spark [the
markets] higher."
Rally on Rumors? A 2%
day on rumors, or hope, is a pretty big move.
MARKET
The S&P 500 was up
2.3% to 1315. VIX fell 10% to 22.16
today, Wednesday.
It is an odd fact of market behavior that as a correction
gets going, the size of the Up-days increases substantially, even as they
become less frequent. In fact, one
indicator for a coming correction is to look for market up-days that are much
smaller than normal over a given period.
Those occurred about a month before the top.
NTSM
The NTSM switched to HOLD Wednesday.
That’s not too big a surprise given that
some parts of the NTSM analysis tend to follow momentum. I think today will be
a short term top and the market will move down from this level. That’s partly a guess.
One thing bothers me…when everyone thinks the market is
going down – it usually doesn’t. Only
time will tell.
MY INVESTED POSITION
I reduced my stock
holdings to 30% (0% in stock in the 401k) at S&P 1358 after the SELL signal
on 9 May 2012. (See the page “How to Use the NTSM System” – the link is on the
right side of this page). I cut my stock
position to 15% on 17 May in order to maintain a 10% gain in a
trading/longer-term position I had in the QQQ.
