Wednesday, April 10, 2013

New Highs for the S&P 500 – World in Recession – Crash Coming?

“There is no doubt we are in the depths of a second global recession since the 2008 Great Recession, but amazingly the U.S seems to have skirted it (so far)...
“...the GDP-weighted bloc shows we have tipped into "mild recession" in Q4-2012. The "non-trivial" economies that are of concern at the moment are France (4% of world GDP), Germany (5.4%), Italy (3.2%), Spain (2.2%), UK (3.9%) and the U.S (25%) that appears on the brink.” - Dwaine Van Vuuren, posted at 
Full story at...

“Even though the S&P 500 and Dow Jones Industrial Average are hovering at all-time highs, Chris Martenson, author of and the “Crash Course” Series, is forecasting a major market correction...Martenson predicts the S&P could fall 40% to 60% to the 600-800 level by this fall. His last major market call was in March 2008, before the financial crisis.” - Yahoo Finance.  Full story at...

I’ve posted something similar before from Mr. Martenson and he is not alone.  There are plenty of crash predictions around.  Problems in Europe, Japan, North Korea, US debt, or rising interest rates are all candidates for a crash trigger, but none are imminent now, and we don’t know if they ever will be.

Wednesday, the S&P 500 finished up 1.2% to 1561 (rounded). 

VIX fell about 4% to 12.36.

Today (Wednesday) had some earmarks of a top.  The price-volume action was “statistically significant” by my measures.  62% of the time, statistically significant days are followed by a down day.  I thought I was pretty smart when I did the analysis to show this relationship.   About a year later I saw this discussed on a trader board and their analysis also showed the same 62% relationship - so much for being smug.  This is apparently widely known.  That may not sound like great odds, but it’s not too far from 66% and that’s 2 to 1.  Most gamblers would be pretty happy with odds 62% in their favor.

These big up-days also can sometimes signal a short-term top prior to a pullback.  There are other clues too.  Today, (Wednesday) the S&P 500 closed 9.9% above the 200-dMA at the top of the trend line; the 10-dMA of breadth remains in a downtrend; sentiment remains high; and then there are the “worries”.  So perhaps the top is near?  I am tired of guessing.

Wednesday, the NTSM analysis remained HOLD at the close. 

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540), due to my risk tolerance rather than the numerical NTSM analysis.  To put it bluntly, I currently have no tolerance for risk.  (If I were strictly following the NTSM numbers, I'd still be heavily invested in stocks.) My reasoning may be found at…