Wednesday, August 21, 2013

Correction - More than 5%

“My concern’s with the second half is the economy isn't building the momentum everyone thought. When the stock market was doing well and it looked like the economy was going to pick up, there were a lot of people that thought economic growth would go to 3% real and I don't think that's likely.  I think we could have another couple quarters at 2%.  People are very bullish, they think we could do 3.5% in 2014, and I think that may be a question also.  We need a reality check.”
“…I think the market has further to go on the downside. One point I'd make is everybody says the market can correct 5%.  The market always has a tendency to go farther than you think, up and down and I think the correction could be greater than 5%.”  Video at…

"Asia’s role as the world’s growth engine is waning as economies across the region weaken and investors pull out billions of dollars…'The eye of the storm is directly above emerging markets now, two years after it hovered over Europe and four years after it hit the U.S.,' said Stephen Jen, co-founder of hedge fund SLJ Macro Partners LLP in London and former head of foreign-exchange strategy at Morgan Stanley. 'This could be serious for Asia.'” Story at…

Perhaps…but you wouldn’t know it from the recent stock market action.

“U.S. businesses are hiring at a robust rate. The only problem is that three out of four of the nearly 1 million hires this year are part-time and many of the jobs are low-paid…"They have put some of the full-time positions on hold and are hiring part-time employees so they won't have to pay out the benefits," said Client Staffing Solutions' Darin Hovendick. "There is so much uncertainty. It's really tough to design a budget when you don't know the final cost involved."…The delay in the Obamacare employer mandate "confused people even further," said Bill Peppler, managing partner at Kavaliro, a technology staffing firm in Orlando, Florida. "When we talk to customers, I still don't think anyone has a handle on this."  Story at...

Wednesday, the S&P was down 0.6% to 1643 (rounded) at the close.

The S&P 500 immediately sold off 10 points when the FOMC minutes were released at 2PM; rocketed up 15 points; then collapsed 10 points in the last hour to finish the day down 10 points.  Apparently, the Fed is split on when to end the taper and the investing public is split on how to interpret the Fed.  The key point may be that the pros sold heavily in the last hour of trading.

VIX was up 7% to 15.94  

The S&P 500 is about 1% below the 50-dMA and I’d say it’s not far enough below the 50-day for the bears to declare victory.  On the other hand, today’s collapse after 3PM might have the bears practicing their dances.   

The S&P 500 is about 6% above its 200-dMA. (Currently the 200-dMA is about 1550.)  That’s really my guess for this correction bottom, but it will need to test the prior low of 1573 first.  1573 might be a turning point too.  Just guessing…

The 10-day moving average of stocks advancing on the NYSE was 41% at the close.  Usually a value below 50% signals. additional trouble for the markets.   

New-lows still outpaced new-highs today leaving the spread at -115 with the 10-day change in spread still trending slightly down.  There was a little good news, because the spread improved today as new-lows dropped significantly (from 247 to 140).  Whether this really means anything depends on the trend.  Daily, these values jump around a lot.

Today’s reading of Internals is negative on the market and suggests the market is likely to continue its downward trend. (No guarantees, of course.) 

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.