Monday, June 17, 2013

Market Has Reversed; Uptrend Returns…for the Short-term

We are born naked, wet and hungry. Then things get worse.

“The pace of growth in New York state manufacturing slowed more than expected in April as new orders tumbled, the latest data to suggest the economy lost some steam heading into the second quarter, data from the New York Federal Reserve showed on Monday… The New York Fed's "Empire State" general business conditions index fell to 3.05, from 9.24 in March, short of economists' forecasts for a smaller decline to 7.”  Full story at…

“If you can receive 2-3 times as much money from unemployment, disability, and/or welfare benefits (subsidized housing, food stamps, free cellphones, etc.) as you can from a temporary or part-time job, and live a life of leisure, why work? In 2011, the U.S. government spent over $800 billion this “welfare,” exceeding expenditures on Social Security or Medicare.”  Story at ZeroHedge at…

“CNBC's Jim Cramer has become more cautious on the market right now and conditions are creating a ‘nightmare scenario’ for just about everyone involved, he said on ‘Squawk on the Street’ Monday…‘I don't like the market as much because I do believe the quarters aren't going to be that great. I just don't think they're going to be blowout,’ Cramer said. ‘What I'm calling for is a market which doesn't really do anything.’”   Story at…

I don’t agree with Jim, for the short-term at least.  More in “Market Recap” below…

Monday, the S&P 500 was UP about 0.8% to 1639 (rounded).
VIX was down about 2% to 16.80.

The markets fell in around 2PM when a report indicated that the Fed may begin tapering soon.  There was good buying in the last hour of trading today, so the pros weren’t reacting like the general market participants.

As I suggested Friday (posted on Saturday), the Market Internals indicated a possible reversal Friday and today’s action confirmed it for me.  The market has once again bounced from its lower trend line.  The down-trend is now over, at least for the short-term.  This trend change has not been confirmed in the charts since the red downtrend line has not been broken, however, market internals continued to be strong today. This chart pattern is the same one that we saw 7 June, but the stats are now positive. (see “Correction Over?” at

I think the market may get back to the recent high of 1666.  (Jeepers! The low was 666 (intraday) and the high was 1666? Cue Rod Sterling:
“You're travelling through another dimension, a dimension not only of sight and sound but of mind; a journey into a wondrous land whose boundaries are that of imagination. That's the signpost up ahead - your next stop…the FED ZONE. “

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

SENTIMENT remains extreme:  (The broken record report.) The 5-day moving average was 69%-bulls in the Guggenheim/Rydex funds I track as of Friday’s close.   That suggests topping in the markets.

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.