Thursday, June 13, 2013

QE to Continue

“The Treasurys market turned a solid day into a late-session rally after a report in The Wall Street Journal reiterating the Federal Reserve’s commitment to low short-term interest rates sent investors into buying mode…reporter Jon Hilsenrath, said the Fed is expected to reiterate its commitment to keeping short-term interest rates low until the unemployment rate falls to a target of 6.5%. The Fed has long made that point, but markets had begun to price in a shorter time horizon.”  Story at…

BUBBLES (Global Economic Advisors)
“If the Fed does slow QE, it will not be because the US economy is strengthening, but rather realization by the Fed (not admitted of course) that various stock and bond market bubbles pose serious economic risks if allowed to grow bigger.”
Story at

“Similar to the U.S. central bank, the Bank of Japan, at the urging of Prime Minister Shinzo Abe, promised to pump liquidity into the economy at a pace even faster than the Fed. But in recent weeks indications have been that the quantitative easing from Japan may not be as big as hoped. Consequently, there's been a huge sell-off that has taken the Nikkei into bear market territory…[Sam Stovall, Chief market strategist at S&P Capital IQ]…"While we believe this decline has further to go in time, and maybe even magnitude, we continue to look upon it as an uncomfortable metamorphosis from a liquidity-led bull market to a fundamentally driven one that will ultimately lead to even higher highs before the year is out."

Thursday, the S&P 500 was down at the open; bounced off the previous low of 1608 and closed up about 1.5% to 1636 (rounded).

VIX was down about 12% to 16.41.

Today was “statistically significant” in price-volume and that suggests a reversal back down tomorrow. 

The S&P 500 is also at its upper down-trend line so further moves to the upside would indicate that the trend is switching up.  This pattern is the same one (with the same stats) that we saw 7 June.  (see “Correction Over?” at

My feeling is also the same.  I think we continue down…no guarantees.

The 10-day moving average of %-advancing is only 42%.  New lows outpaced new-highs by 257.  These aren’t good numbers so further downside is expected.

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

SENTIMENT remains extreme: 73% of traders were long in the Guggenheim/Rydex funds I track as of thre close on Wednesday.  The 5-day moving average was 68%-bulls.  Both numbers are consistent with a topping process, but my guess is that we’ve seen the top.

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.