Monday, June 10, 2013

Fed to Stay Aggressive? More Stock Market Crash Predictions…

“Labor market conditions have improved since last summer, suggesting the Committee could slow the pace of purchases, but surprisingly low inflation readings may mean the Committee can maintain its aggressive program over a longer time frame," said St. Louis Fed President James Bullard.
Bullard is a voting member of the Fed's policy-setting committee this year.”   Story at…

Let the good times roll!
Maaybe not…

“…its turning over pretty good, I… went 20% short the s&p…I have to remember that trade is for the big slide to come...”

"We think investors with a longer-term outlook should tread carefully in financial markets," TrimTabs said in its widely followed weekly market analysis. "The Federal Reserve and its fellow central banks have succeeded in making almost every major asset class in the world overpriced." – Trim Tabs.  Story at…

"By propping up asset markets, the Fed has created an illusion that wealth is being created… should the Fed lose control of asset prices (is this what is now happening in Japan?), then the game will be up and the downside move in markets may well be terrifying." – Charles Grave. Story at…

It’s possible, but let’s hope the probability is low.  Still, history suggests that the markets are overdue for a huge drop.

“When in history has consumer confidence been at a 5-year high, with fewer than 30% bears among investment advisors, a Shiller P/E* greater than 18 (it’s presently 24), and the Dow Utility average down more than 5% from its 6-month high? 2013 (today), mid-2007, early 2000 and Aug-Sep 1987. Nobody cares. That indifference is probably unwise… we expect the S&P 500 Index to be only about 10% higher, 10 years from now…The good news is that even we expect stocks to outperform Treasury bonds over the coming decade. The bad news is that we don’t expect these returns to be achieved smoothly, and instead expect that the coming decade will probably include two separate market declines on the order of 40-50% each.” – John Hussman, Weekly Market Commentary, June 10, 2013, from Hussman Funds.  Full story at…

Monday, the S&P 500 closed down about one-half point to 1643 (rounded).
VIX was up 2% to 15.44.   

The S&P 500 closed down today so the trend (in my opinion) remains down – it’s a close call though.

Internals also suggest the trend remains down.  The short term new-high/new-low stat that I noted in the last blog had turned upward has reversed; it is again headed down. 

Decliners exceeded advancers by 26% today, so it is a little surprising the S&P 500 didn’t close lower than it did.

Monday, the overall NTSM analysis was HOLD at the close.   SENTIMENT remains negative.   VIX, Price and Volume indicators are neutral. 

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.