Tuesday, June 25, 2013

Durable Goods Orders; Bond Market Selloff

“Orders for big-ticket U.S. goods jumped 3.6% in May, mainly because of more demand for commercial jets and military equipment. Economists surveyed by MarketWatch had expected orders to rise 3.8%...Stripping out the volatile transportation sector, orders [rose] a much smaller 0.7% last month. Orders for core capital goods, a key barometer of private-sector business investment, advanced a modest 1.1% but posted the third straight gain.”  Story at…

A bond sell-off has been anticipated for years, given the long run of popularity that corporate and government bonds have enjoyed. But most strategists expected that investors would slowly transfer out of bonds, allowing interest rates to slowly drift up.

Instead, since the Federal Reserve chairman, Ben S. Bernanke, recently suggested that the strength of the economic recovery might allow the Fed to slow down its bond-buying program, waves of selling have convulsed the markets…
…The recent pain has spilled over into stock markets, pushing the Standard & Poor's 500-stock index down an additional 1.2 percent on Monday.”  Story at…

“…some analysts say investors are overreacting to the latest statements by Fed chairman Ben Bernanke, who has stressed that the central bank will do more if the economy falters.   "I think that soon, investors will figure this out and start to buy again," said Kevin Giddis, head of fixed-income at Raymond James. "In the meantime, it is hard to watch."   Story at…

This is a threat.  Panic in markets is never a good thing.  Many have expressed grave concerns over run-away interest rates; the ongoing sell-off in the bond market represents that risk, but as noted above, it may reverse and interest rates are far from catastrophic.

“Downside target for Nasdaq is roughly 3060 and for S&P roughly 1460 unless things fall apart in a bear market. Good luck trading, Don”

There are always unintended consequences of the ill-conceived political “solutions” the clowns in Washington dream up.  This is from Mish Shedlock at Global Economic Analysis:
Immigration Bill Incentivizes Employers To Fire Americans and Hire Amnestied Immigrants; Immigration and Obamacare’s Employer Mandate
Mish presents a logical and well thought out case.

Tuesday, the S&P 500 was up 1% to 1588 (rounded).
VIX was down about 8% to 18.47.

The S&P 500 is close to its lower trend line at about 1550 (my assessment).  Today’s bounce may simply be a response to where others see the lower trend line.

Tuesday, the overall NTSM analysis remained SELL at the close. The first NTSM sell signal in this cycle was on 16 April at S&P 500 1575. 

Sentiment, Volume and VIX are all negative and the “panic-indicator” flashed sell Thursday (on the huge down day).  Price is positive; more on that in Market Internals below.

Internals improved today, as expected on the up day.  The 10d-MA of breadth is still only 44%; above 50% represents a healthy market.

There was a big turn in “spread” for new-high/new-lows.  Spread is the difference between the numbers of stocks making new-highs vs. new-lows.  Yesterday the spread was -525; today it was -95.  That suggests a turn in the markets and a possible bottom, but there are so many other negative indicators now that it is hard to know what is signal and what is noise.  This indicator is in the Price category of the NTSM analysis, but it is only one indicator and it always takes more than one indicator to call a buy.  Further, my classical “bottom-analysis” looking at price, volume, and market internals did not indicate yesterday as a bottom.  Still, this warrants following carefully.  We’ll just have to see what happens with other indicators in the next couple of days.  

SENTIMENT is now neutral:  The 5-day moving average was down to 65%-bulls in the Guggenheim/Rydex funds I track as of tonight's (Tuesday’s) close. 

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.