Wednesday, July 31, 2013

GDP...Mixed Results on Jobs...FED Downgrades the Economy

GDP (CNN/Money)

“Gross domestic product -- the broadest measure of economic activity -- rose at a 1.7% annual rate in April through June, slightly faster than the 1.1% rate in the first quarter, the Bureau of Economic Analysis reported Wednesday…"With this report, the story of modest growth just continues on," said Jason Schenker, president and chief economist of Prestige Economics.”  Story at…

ZeroHedge also noted that Q1 of 2013 (note typo in the above chart) was revised down from 1.8% to 1.1% in today’s release.  That was the biggest miss in 27-months.  Story at…

“TrimTabs Investment Research estimates that the U.S. economy added 23,000 jobs in July, down sharply from 135,000 jobs in May and 182,000 jobs in June…TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than the initial estimates from the Bureau of Labor Statistics.”

ADP JOBS NUMBERS AT 200K…10-times higher than Trim Tabs.
Interesting that there is such a difference.  The important number will be the Government’s Job report Friday.

All in all…mixed and conflicting data continues…
In the end, only one thing matters: Corporate earnings.

“As corporate earnings season passes the halfway point, results have been good enough but not particularly good, signaling that a hoped-for strong surge in the second half could be elusive.  In fact, were it not for a robust financial sector, profit on the S&P 500 would be tracking negative 1.6 percent, according to Bank of America Merrill Lynch consensus estimates.”  Full story at…

“Art Cashin of UBS said Tuesday that a little-noticed announcement Monday lends further credence to the belief that the Federal Reserve will begin tapering in September…‘Last night the Treasury announced that their borrowing will be slashed by 25 to 30 percent for the balance of the year," he told CNBC. ‘So the Fed has to taper to not be disruptive. There's not enough supply out there, so they've got to cut back.’”  Video at…

Hmmm…Maybe, maybe not.

“The Federal Reserve said Wednesday that the U.S. economy is growing only modestly, a downgrade from its June assessment. The Fed expects growth will pick up in the second half of the year, but the more cautious message may be a signal that it's not ready to slow its bond purchases soon.  In a statement after a two-day policy meeting, the Fed says it will keep buying $85 billion a month in bonds to help lower long-term interest rates.” Story at Yahoo Finance…

Wednesday, the S&P 500 made an intra-day, all-time high around 3PM, but then fell more than 10 pts in the final hour and ended unchanged at 1686 (rounded) due to the Fed announcement. 
VIX was up about 0.5% to 13.45. 

The 10-day moving average of stocks advancing on the NYSE ended just below 50%.  Usually a value below 50% signals additional trouble for the markets.

The change in the daily spread of new-highs and new-lows has been improving, though it is still pointing down.  Market internals are still trending down so internals suggests further down for the S&P 500.

Wednesday, the overall NTSM analysis was HOLD at the 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.