Monday, August 26, 2013

Durable Goods Orders Plunge…Pentagon May Fire Thousands…Recession

DURABLE GOODS ORDERS PLUNGE 7% (Global Economic Trend Analysis)
“Is this the plunge that accelerates or is another bounce coming? Given the "unexpected" plunge in new housing and the rise in mortgage rates, I suggest an acceleration to the downside.” - Shedlock
Full story at

I think it is too early to panic.  From “If we exclude transportation, "core" durable goods were a less negative -0.6 percent and up 5.9 percent YoY.”  See the analysis by Advisor Perspectives at…

“The Defense Department may have to fire at least 6,272 civilian employees if automatic cuts known as sequestration slice $52 billion from its fiscal 2014 budget, according to a Pentagon planning document…For the most part, major weapons programs aren’t being targeted for extensive reductions, according to the plan, which was a presentation by Pentagon budget and cost-assessment officials for generals and admirals who oversee force structure and resources for their respective services…
…The planning document is stamped “Draft/Pre-Decisional”and said no final decisions have been made.”

“The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index slipped 0.4% in July after edging 0.1% higher in June…The latest drop was the first since April... ‘After gaining a total of 2.2% in May and June, it isn’t surprising that tonnage slipped a little in July,’ ATA Chief Economist Bob Costello said. ‘The decrease corresponds with the small decline in manufacturing output during July reported by the Federal Reserve last week.’”  Full press release at…

The trucking sector correlates pretty well to the economy, but this is only one data point and no need to panic.  We’ll need more than one month to get concerned. 

One note of caution: Cyclical stocks are now underperforming the S&P 500 by 0.5% over the last 10-days.  This may be the first sign that investors are beginning to have some doubts about the economy; it is a definite warning of correction if the trend continues.  As it is now, it doesn’t mean much; it just warrants watching.

Monday, the S&P was down 0.4% to 1657 (rounded) at the close.
VIX was up 7% to 14.99.          

NEWS TRUMPS TECHNICALS. The market had been doing OK until John Kerry called Syria's use of chemical weapons "undeniable" around 3:30PM and the markets tanked.  If you want more details here’s a link to a TIME Swampland story, video and text of Kerry’s remarks...

Market Internals are now mixed with breadth (measured as percent-bulls) falling again and new-high/new-low data still looking generally positive, although without any big clear-cut reversal like the last time the S&P 500 visited the 50-day moving average.

The 10-day moving average of stocks advancing on the NYSE fell to 44% at the close, reversing the up-trend in the 10-dMA.

New-highs outpaced new-lows today leaving the spread at +78 (it was +3 yesterday), with the 10-day moving average of change in spread now trending slightly up.  This indicator is now moving up, but not strongly.

Today’s reading of Internals is neutral on the market, with conflicting information.  (News trumped the technicals.)

Monday, 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.