I always enjoy John Hussman’s Weekly Market Commentary. It’s no surprise that he remains negative on the economy and the stock market.
This week he posted a
chart of “…new orders, and order backlogs components of numerous regional
surveys from the Federal Reserve and the Institute of Supply Management (ISM)…”
that showed data points are already below the levels at the start of the last
recession. He further noted that…"We
observe the same sustained deterioration in economic data across the world,
including Europe and China (where the absolute values are higher, but the
standardized values are similarly bad). The overall pattern reflects what
Lakshman Achuthan of ECRI often describes as the “three P’s” – pronounced,
pervasive, and persistent. Those three P’s help to distinguish signals from
noise. Presently, our own noise-reduction methods suggest that a global
recession is at hand.” - John Hussman,
PhD, from his 13 Aug 2012 Weekly Market Commentary at Hussman Funds at http://www.hussmanfunds.com/
UCLA PULSE OF COMMERCE INDEX
The chart below is UCLA’s Pulse of Commerce Index (PCI) and it tracks fueling tickets for over the road trucking using real-time fuel consumption data. As noted by its close correlation to Industrial Production, it was remarkably accurate in predicting the great Recession. It is also remarkably in tune with GDP.
The chart below is UCLA’s Pulse of Commerce Index (PCI) and it tracks fueling tickets for over the road trucking using real-time fuel consumption data. As noted by its close correlation to Industrial Production, it was remarkably accurate in predicting the great Recession. It is also remarkably in tune with GDP.
When I last looked at this
data it was showing a dip that seemed to be confirming a recession. As of May (the latest data posted) that
doesn’t seem to be the case. The real
question may be, “What’s the June or July curve going to look like?” With a lag of several months this data won’t
give me too much confidence that the US economy can avoid recession.
BULL
MARKET STATS
The
current Bull-market within the secular bear market has lasted roughly 39-months
from the March 2009 low to present. The
gain so far has been about 100%. Going
back to 1907, the average gain has been 100% and the average length of bull has
been 26-months.The longest bull was from 2002-2007 (63-months). The greatest gain was from 1932-1934 (169%).
MARKET
Monday the S&P 500
finished down roughly 0.1% to 1404. VIX
fell about 7% to 13.67. VIX usually
rises when the S&P falls; divergence as much as today’s often produces an
up day the following day.
NTSM - BLOG
The
NTSM analysis was again BUY at the close on Monday. (The NTSM analysis is designed to call a BUY or SELL at the bottom or top respectively. For that reason a BUY at this point is less significant than it would be at a bottom. NTMS can reverse quickly, even after a buy call.)
I
am cautiously optimistic in the short run, but very pessimistic in the long
run. The S&P 500 is now close to making
a double top. It will need to break the
old recent high around 1410 if this bull is going to continue.
MY INVESTED POSITION
Based on the BUY signal, 6
July, I moved back into the market on 9 July (after the weekend) at S&P 500
1352. I now have a 50% stock allocation
overall. For my age, that is what most
advisors recommend, however, I am normally much more aggressive. I have less invested in stocks now because
there’s a lot of risk.
NTSM 2012 BLOG PERFORMANCE
So far this year NTSM is
beating the S&P 500 by a whopping ½% on one trade. For prior years see the page, "Performance of the NTSM System" on this blog page.
