“Make no mistake, last week’s decline was not because of a hawkish Federal Reserve, but in spite of a dovish one…Bernanke indicated that the Fed will not stop adding to it until at least 2014…The fact that we are…seeing broad internal deterioration here is of some concern, because it smacks of something more afoot. It might be the increasing credit strains in China. It may be growing expectations for disappointing earnings preannouncements. It may be economic weakness that finally catches up to the general (though not uniform) deterioration that we’ve seen across leading measures of economic activity … But whatever the reason, investors appear to be shifting from risk-seeking to risk-aversion…
...What concerns me most is that the present market
environment is very reminiscent of other cycles in which deterioration of
interest-sensitive securities, following overvalued, overbought, overbullish
conditions, was then joined by broad deterioration in market internals…There
are five instances: 1929, 1987, 2000 and 2007 and today. The prior ones are
associated with some of the worst market losses in history.” – John Hussman,
PhD, Hussman Funds weekly Market Commentary for 24 June 2013 at
http://www.hussmanfunds.com/wmc/wmc130624.htm
My comment: I’ve taken excerpts from the commentary to
get to the essence. I recommend a full
reading of this week’s Hussman commentary.
COMMENT FROM A DAY TRADER
“One thing is for sure: virtually everyone (except
staunchly bullish stock brokers) realizes that the economic
"recovery" is an illusion which only exists because of the Fed's
monetary support. And most are prepared to rush for the exits at the hint of
that support being reduced or removed. The global economic conditions are only worsening,
not improving. And the US will be negatively impacted by what's happening in
Japan, China, and Europe. Once this ball starts rolling downhill, it will be
difficult to stop.”
My comment: There remains the possibility that the US can
avoid the world-wide downturn…unlikely; but it is a possibility.
BARGAIN HUNTERS BEWARE (Reuters)
“Bargain-hunters beware! Wall Street's 2 percent weekly
fall may not be the buying opportunity for stocks that it might seem. The stock market begins the last week of June
still rattled by the U.S. Federal Reserve's plans for reducing its stimulus
efforts, called quantitative easing, or QE. Next week could bring more big
intraday swings and volatility as asset managers reevaluate their portfolios to
adjust to the new regime of diminishing support from the Fed.” Story at…http://www.reuters.com/article/2013/06/22/us-usa-stocks-weekahead-idUSBRE95K17I20130622
BERNANKE SHOWS POOR TIMING (Reuters)
“St. Louis Federal Reserve Bank President James Bullard
on Friday issued a sharp rebuke of his colleagues' decision this week to
announce a plan to reduce the central bank's bond buying, calling the move
premature and worrying the Fed is risking its credibility as a force for price
stability…."President Bullard ... felt that the committee's decision to
authorize the chairman to lay out a more elaborate plan for reducing the pace
of asset purchases was inappropriately timed," the regional Fed bank said
in a statement.” Story at…http://www.reuters.com/article/2013/06/21/us-usa-fed-bullard-idUSBRE95K0FY20130621
MARKET REPORT
Monday, the S&P 500 was down 1.2% to 1573 (rounded).
VIX was up about 6% to 20.11.Monday, the S&P 500 was down 1.2% to 1573 (rounded).
Monday was day 23 in the correction
counting from the top on 21 May. The 19%
correction in 2011 lasted 108-days. (The crash in 2009 lasted more than 200
days.) No sign of a turn-around
yet.
NTSM
Monday, the overall NTSM analysis was again SELL at the close. The first
NTSM sell signal was on 16 April at S&P 500 1575. Today the S&P 500 broke below that level.
Sentiment, Volume and VIX are all negative. Add in the “panic-indicator” that flashed
sell Thursday (on the huge down day) and NTSM analysis remains firmly in the
negative camp.
MARKET INTERNALS
Internals were horrible today, Monday.
Only 13% of stocks advanced today and over the last 2-weeks only 38% of
stocks have advanced. New-high/new-low
data was horrendous too, (I’m running out of stupid adjectives) with 17 new
highs compared to 542 new lows.
SENTIMENT remains extreme: (The
broken record report.) The 5-day moving average was 67%-bulls in the
Guggenheim/Rydex funds I track as of Friday’s close. That was down only 1% from Thursday.
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500
-1540). My reasoning may be found at… http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
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.
