Why I got (mostly) out of the Stock Market Today

BIG BRICK WALL FOR STOCKS (CNBC) - Zimmerman
“All technical indicators suggest the stock market is poised for a crash, Walter Zimmermann of United-ICAP said Monday.
 
On CNBC's "Fast Money," the chief technical analyst said that a look at the bigger picture shows a "bearish rising wedge" in the stock market charts... "Sentiment is definitely too bullish," he said, noting that investors have not been this bullish for this long since 1997, during which the stock market kept making new highs. "Here, the pace has become glacial."

...there's a chance of one more leg up, maybe to 1,590, best case. Everything leads to a big brick wall overhead at 1,590."  Full story at…http://www.cnbc.com/id/100519002
  
ASSET (STOCK MARKET) BUBBLES (Lance Roberts)

“The chart below shows top line sales versus reported and operating earnings. The last two major market peaks have coincided with earnings topping, and beginning to weaken, much like we are seeing currently.”

Chart from http://www.streettalklive.com/daily-x-change/1560-there-is-no-asset-bubble.html

"I don't see much evidence of an equity bubble." - Ben Bernanke

My comment: I remember a rather famous exchange between Bernanke and Maria Bartiromo of CNBC where Ben said that there was no evidence of a real estate bubble; that was a year or two before the crash.  Lance Roberts presents convincing evidence of several bubbles now underway including margin debt in the stock market (the chart looks like 2007 all over again) and junk bonds at record low yield (driven down by excess demand) and suggested that the risk of recession has increased.

MARKET CRASH

Lance Roberts concluded his blog with the following:
“History is replete with market crashes that occurred just as the mainstream belief made heretics out of anyone who dared to contradict the bullish bias.

Does an asset bubble currently exist? Ask anyone and they will tell you "NO." However, maybe it is exactly that tacit denial which might just be an indication of its existence.” – Lance Roberts, StreetTalk live

http://www.streettalklive.com/daily-x-change/1560-there-is-no-asset-bubble.html

MARKET RECAP
Tuesday, the S&P 500 finished up about 1% to 1540 (rounded).  VIX was down 3.8%, to 13.48      

At mid-day, the S&P 500 was up to 1542, only 3pts below my 1545 target.  Given that my target looked like it would be met, and the big up-day underway, I decided to take profits and get out of the market.

Right now, that looks like a questionable move, because today was not a statistically significant day as I run the closing NTSM numbers.  That’s the risk of trying to guess the direction of the market, even for only part of a day.  I expected the S&P 500 to keep going up when I impulsively decided to sell.  (My retirement program requires that orders be made before noon.)

IS SELLING OUT THE RIGHT MOVE?

Let’s consider why this may still be a good idea.
(1) The Pros I follow (and you see their blog-links here) are generally very negative now.
(2) The NTMS analysis has shown cracks even though it is now HOLD.
(3) The cyclical stocks are underperforming (They did better today, but are still underperforming).
(4) Breadth (%-stocks advancing) is going down while the market goes up.
(5) The end of the 2% cut in SS taxes, the Sequester, and European recession will likely reduce corporate profits.
(6) We are approaching 10% above the 200-day moving average on the S&P 500.  That may be a correction trigger.
(7) The S&P 500 is now up 8% on the year.  That’s a pretty good return given all of the problems world-wide.  Even if I am wrong by getting out now, there is a good likelihood I’ll be able to buy back later at a lower price.
(8) The investment Institute indicates inflows into domestic long-term mutiual funds.  That has been near a top in the past
(9) The market is making new highs.  Sell when everyone else is buying; buy when everyone else is selling
(10) Last, and most importantly, caution is the watch word, because I don’t want to accept losses now, even though I am a gambler at heart.

“What’s the matter McFly?...Chicken?” Bwaaaak, Buk, Buk, Buk, Bwaaaak.  Yup!

CORRECTION OR CRASH

I am not predicting a crash now; it looks like a correction top to me; but if the news turns bad, the correction could morph into something more serious. 

NTSM

Tuesday, the NTSM analysis remained HOLD at the close with most indicators solidly in neutral.

MY INVESTED POSITION

I took a hedging, short-position Wednesday afternoon, 27 Feb 13, with a very tight stop.  I said that if Tuesday was an up day – I’d cover the short.  I didn’t because of the big move up.  In such a case, it is better to wait at least a day.  I’ll cover Wednesday if the market is up again.

With longer term funds, I cut back to about 20% invested as I went to cash in the retirement account. 

Based on an emotional decision (yeah, I know – I’m supposed to be disciplined and follow my numbers in the NTSM system) I sold stocks back to about 20% in the stock market on 5 March.  NTMS was HOLD at the time, but for a lot of reasons See 5 March 2013 blog), I decided to sit out for a while and watch the market from the outside.  

I am currently invested in a range of near 20% invested in stocks.