“I continue to believe that the S&P500 can trade up towards the 1575/1550 area, where we have, so far, a grand double top. I would not be surprised to see the S&P trade marginally through the 2007 all-time nominal high (the real high was of course seen over a decade ago – so much for equities as a long-term vehicle for wealth creation!). A weekly close at a new all-time high would I think lead to the final parabolic spike up which creates the kind of positioning extreme and leverage extreme needed to create the conditions for a 25% to 50% collapse in equities over the rest of 2013 and 2014, driven by real economy reality hitting home, and by policymaker failure/loss of faith in "their system”.
I always like to remind clients that, in the run up to the 2000 and 2007 highs, before the significant collapses that followed in the subsequent 18/24 months, markets seemed infatuated in Greenspan and his famous "Put” the same way today’s teenagers seem infatuated with Justin Bieber, investor complacency was off the charts, volatility was at record lows, belief in "the system” was sky high, and positioning was at extremes. The flashing common sense warning signs were being ignored, if not mocked. Time – the next 18/24 months – will we think provide the answer as to whether we are witnessing a repeat disaster in the making.” - Bob Janjuah See full commentary reposted at ZeroHedge....
http://www.zerohedge.com/news/2013-02-05/bob-janjuah-sees-final-parabolic-spike-1575-followed-50-market-crash
EARNINGS REPORT CARD FROM FACTSET
(Excerpted from the “1 February 2013 Earnings Insight”}“With just under 50% of the companies in the S&P 500 reporting actual results, the number of companies reporting earnings above estimates is in-line with recent averages, while the number of companies reporting revenues above estimates is above recent averages.... In aggregate, companies are reporting earnings that are 4.0% above expectations.... The blended revenue growth rate for Q4 2012 is 2.3%, slightly above an expectation of 2.2% on December 31. Nine of the ten sectors are reporting revenue growth for the quarter, led by the Utilities and Health Care sectors. On the other hand, the Energy sector is the only sector reporting a year-overyear decrease in revenue for the quarter.”
Earnings look pretty good at this point. How about employment?
SEASONAL ADJUSTMENTS ARE BS -
I CAN HANDLE THE TRUTH ON EMPLOYMENT - Lance Roberts of Streettalk Live
“The recent release of the January employment figures sent the media and blogosphere abuzz with a wide variety of arguments revolving around seasonal adjustments, birth/death adjustments, household versus survey data and much more.... 157,000 jobs were created in January the actual data shows a decline of 2.84 million. This discrepancy is due to the termination of temporary seasonal hires for the holiday shopping season. It happens every year so in order to "smooth" out these seasonal variations the BLS literally adds jobs back, which for the month of January, amounted to the addition of 2.12 million artificial employees.... by using a simple 12-month average of the non-seasonally adjusted employment data, excluding all seasonal or birth/death adjustments, we can achieve a clearer picture about the real state of employment and the economy. Of course, the immediate question is how does it compare to the data that is released to the BLS? I have included that data as well which shows there is not a great deal of variation between the two methods.”
“What is immediately noticeable when analyzing the data in this manner is that it appears that employment may have peaked for this current economic cycle. This is not surprising considering that this recovery is four years old and pushing the outer bounds of historical economic cycles.” – Lance Roberts Guest post at...
http://advisorperspectives.com/dshort/guest/Lance-Roberts-130204-New Employment-Index.php
MARKET RECAP
Tuesday, the S&P 500 bounced back, up 1% to 1,511 (rounded). VIX fell over 6%, to about 13.7. (A falling VIX is always good.)
There was
late-day selling today as there has been for the last 2-weeks. So the so-called "smart-money" investors are taking profits.
NTSM
The NTSM analysis remains HOLD on Tuesday.
Sentiment held at 61%-bulls as of the close on Monday {calculated
from selected Guggenheim (formerly Rydex) bull/bear funds}. That’s in the caution level. It needs to get to 67% before I have an
outright sell on the sentiment indicator and even then, the NTSM analysis doesn’t
run on only 1-indicator.
The extra-volatility in the market (bigger up-and-down,
market-moves, not VIX) that we have seen recently is an indication that a top is
near. The top would probably just be a
correction-top since there aren’t any red flags in the news that will drive the
markets down drastically. However, bad
news tends to feed on itself so we’ll wait and see what the correction brings.
I think the markets can go up another 4% or so before any
correction kicks off.
MY INVESTED POSITION
Based on a BUY
signal 7 of 9-days, and more importantly, consecutive closes above the prior
high of 1466, I moved into the stock market at 1471 on the S&P 500 on 14
January. I am currently invested in a
range of near 50% invested in stocks.
