Monday, May 20, 2013

Chicago Fed: National Economic Activity Drops

“The Chicago Fed's national activity index worsened in April, falling to negative 0.53 from negative 0.23 in March. The three-month moving average meanwhile was at negative 0.04 from negative 0.05 in March.”  Story from…

The numbers are lower than the previous data, but they are far from recessionary levels.  

ZeroHedge suggested that falling Catterpillar US sales may indicate trouble for the US economy.  Story at…

“Caterpillar’s construction and mining equipment continued to face sales headwinds in North America, posting a 9% drop globally in April despite stronger demand from Latin America…In North America, the largest regional segment for Caterpillar, April sales fell 18% from a year ago in the wake of 11% and 12% declines in March and February, respectively.”  Full story at…

CAT was up on the day so investors weren’t concerned about CAT, specifically.  More to the point, when I look at the relative performance of Cyclical stocks vs. the S&P 500, concerns are present, but the Cyclical stocks are still headed up, so investors are not currently worried about recession.

After warning that market's were due for a pullback for more than a year (as well as repeating the ECRI recession-call even longer), John Hussman has thrown in the towel (so to speak) without issuing a market commentary this week.  Last week’s commentary was titled, “Closing Arguments: Nothing Further, Your Honor” and I guess he meant it.

He does continue to update “Fund Notes” at the end of the commentary.  If there was any question about his opinion on the markets, here is the first sentence of today’s fund note: “As of last week, the market environment remained characterized by an overvalued, overbought, overbullish, rising-yield environment that is (sic) places present conditions in the singularly most negative such syndrome we define.” Fund Notes are included at the end of the market commentary at…

That about says it all.

Monday, the S&P 500 closed down a point to 1666 (rounded).  That’s 1,000 points higher than the 666 intraday low in March of 2009.
VIX was up 4.6% to 13.02.

Monday, the overall NTSM analysis was HOLD at the close.   

I have been considering putting some money back into stocks, but that hasn’t been possible with the NTSM analysis giving sell signals as it did for the 3-previous days.  Sometimes you have to consider joining the crowd.  I am not there yet, again, because of the recent sell signals.

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…(although that probably looks pretty lame by now.)
The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)

I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.