Friday, August 30, 2013

Chicago PMI

CHICAGO PMI (Business Insider)
Chicago PMI rose to 53.0, meeting expectations.  July's reading was 52.3.  It's the first back-to-back gain in two years.”  Story at…

Regular readers of this blog know that I post excerpts from John Hussman regularly.  Hussman has been negative on the stock market for more than a year.  Here’s a piece from Business Insider on the subject.

I will go out on a limb here and say that I think there's a good chance that John Hussman will ultimately be proven right.  Even if the market doesn't actually crash, I think it's highly likely that stock returns will be lousy for the next ten years.
If you want to feel comfortable and happy, go ahead and ridicule John Hussman with everyone else.  If you want to prepare yourself for what seems like a likely possible stock-market future, however, read on...
HUSSMAN – ‘Frankly, I wonder whether any amount of arm-waving will incline investors to actually examine their risk exposures here, much less consider the prospect of a 40%+ decline in the S&P 500 Index that would be required simply to bring stocks to historically run-of-the-mill valuations. But at a time when our estimates of prospective risk are surging, I would be remiss not to observe that fact.’
…You have been warned!”   Full story at


“The important event that created anxiety in markets Thursday—which many may have missed—was comments from Richmond Fed President Jeffrey Lacker." …including Lacker's opinion that the labor market has met the condition for the Fed to begin a tapering of its asset purchases….Cashin said that the comment that "hit me over the head like a two-by-four" was Lacker's view of future U.S. GDP growth…that he expects that growth will average "about 2 percent going forward."  This level is "just above stall speed," Cashin said. "It's going to be dangerous to start tapering if you're just above stall speed."’  Art Cashin is director of floor operations at UBS Financial Services.  Story and video at…

GDP has been around stall speed for so long that I had assumed that the “stall speed” term had been dropped by Wall Street - apparently not. 

My opinion: Since QE has had little effect on the economy, I doubt that the “Taper” even matters for the economy.  It matters to Wall Street, however, and I expect the markets to react negatively when Tapering (the slow-down of Fed bond-buying) starts.   

The following report is from CNN…
“A preliminary U.S. government assessment of last week's chemical weapons attack in Syria has made these key findings:
--1,429 people were killed in an August 21 chemical weapons attack in Syria and asserted that "we assess with high confidence that the Syrian government carried out the chemical weapons attack against opposition elements in the Damascus suburbs."
-- The United States says it has "intelligence that leads us to assess that Syrian chemical weapons personnel ... were preparing chemical weapons munitions prior to" what Washington believes was a chemical weapons attack in the Damascus suburbs on August 21…
…Citing support from the Arab League, Turkey and France, Secretary of State John Kerry said Friday that "we are not alone in our will to do something about" last week's chemical weapons attack in Syria that he blamed on the regime of President Bashar al-Assad.”  Full story at…

Kerry made it clear that the US must not embolden others to use chemical weapons by doing nothing.  He laid out such a clear case that it seems inevitable that the US will act.

Markets fell during Kerry’s speech, but rebounded afterwards.

Friday, the S&P was down 0.3% to 1633 (rounded) at the close.
VIX was up 1% to 17.01.

The 10-day moving average of stocks advancing on the NYSE remained 49% at the close Friday.  Any number below 50% suggests trouble for the market, but the trend has been up, so it will be interesting to see what happens Tuesday.

New-lows outpaced new-highs today leaving the spread at -30 (it was -4 yesterday), with the 10-day moving average of change in spread trending up. 

Today’s reading of Internals is mixed on the market so let’s wait and see what happens next week. 

Friday, 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.