The Federal Reserve's talk of tapering asset purchases won't kill the rally in equities, two top market economists told CNBC on Thursday. They said stock prices are likely to rise into 2014.
"Risk assets will eventually collect themselves and will be doing better," said Ward McCarthy, Jefferies & Company chief U.S. financial economist. He cited four reasons for a bullish stance on equities: continued job growth, an improving housing sector, high growth potential in energy and manufacturing that is "poised for recovery." Story at…
http://www.cnbc.com/id/100831606
PHILLY FED ACTIVITY PICKS UP TO A 2-YR HIGH
“The Philadelphia Federal Reserve Bank said its business activity index rose to 12.5 from minus 5.2 in May,
far exceeding economists' expectations for minus 2. It was the highest level
since April 2011…Any reading above zero indicates expansion in the region's
manufacturing. The survey covers factories in eastern Pennsylvania, southern
New Jersey and Delaware.” Story at…http://www.reuters.com/article/2013/06/20/us-usa-economy-phillyfed-idUSBRE95J0Q320130620
LEADING ECONOMIC INDEX UP (Conference Board)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. increased 0.1 percent in May to 95.2 (2004 = 100), following a 0.8
percent increase in April, and a 0.3 percent decline in March……Says Ataman Ozyildirim, economist at The Conference Board: “Despite month-to-month volatility, the LEI’s six-month growth rate remains steady, suggesting that conditions in the economy remain resilient. Widespread gains in the leading indicators over the last six months suggest there is some upside potential for economic activity in the second half of the year.” Press release at….
http://www.conference-board.org/data/bcicountry.cfm?cid=1
…but as noted in a prior blog, the stock markets don’t correlate well to
the economy and today was all about the Fed and tapering.
Markets look 3 to 6-months out and investors don’t like the thought of a
market without the Fed’s QE. In the
past, I have often argued, as Bernanke did yesterday, that the Fed wasn’t putting
on the breaks, just easing up on the accelerator. No matter – investors didn’t like it then and
they don’t like it now: Time to price in the new information.
MARKET RECAP
Thursday, the S&P 500 was down 2.5% to 1588 (rounded).
VIX was up about 23% to 20.49. Thursday, the S&P 500 was down 2.5% to 1588 (rounded).
NTSM
Thursday, the overall NTSM analysis switched to SELL at the close.
SENTIMENT remains extreme: (The
broken record report.) The 5-day moving average was 68%-bulls in the
Guggenheim/Rydex funds I track as of Wednesday’s close. (It will be interesting
to see Sentiment at the close today!) VIX
is negative as the options players woke up in a big way. VOLUME went negative.
CORRECTION CONFIRMED
Market internals crashed Thursday; the S&P 500 broke its lower trend
line; VIX rose dramatically and is now over 20; the “panic indicator” in the
NTSM system flashed sell; and the S&P 500 broke its 50-dMA. If the market falls to its 200-dMA, it will
drop another 5.5% from here. (That has been my prediction for some time.)
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.
