Thursday, August 29, 2013

GDP Revised Up to 2.5%…Jobless Claims…Summers; A Black Swan?

(I revised the title of this Post because search engines are sending people to an older similar post. - 4 Sep 2013) 

“Second quarter GDP was revised up to 2.5% in the second estimate from a previously reported 1.7%. That is up from a 1.1% gain in Q1 2013. The consensus expected second quarter GDP to be revised to 2.1%...Overall, the upward revision to GDP growth does not suggest that the underlying currents of weak growth are ending. Almost the entire upward revision came from a stronger-than-originally reported trade deficit, which is likely to reverse in the third quarter. That means the increase in GDP pulled potential growth from the third quarter into the second and was not the result of a strengthening economic situation…Even after the upward revision to second quarter GDP, expectations for future growth remain soft.”  Full story with charts and analysis at…

“The number of people filing for first-time unemployment benefits fell to a seasonally adjusted 331,000 last week from the previous week's revised figure of 337,000.  Analysts had expected the number to drop to 332,000.”
Story at…,0,5625754.story

“Speculation that Larry Summers is the favored candidate to take over Ben Bernanke as Fed chief has resurfaced in recent weeks, prompting a strong backlash from some industry watchers, with one going as far as labeling his potential appointment as a ‘black swan’ event….
…Summers is seen as a greater hawk between the two, which analysts say could mean the rapid unwinding of the massive U.S. monetary stimulus that has supported the economy.  ‘That could be the black swan that people aren't expecting,’ Bouroudjian said.’”  Story at…

Thursday, the S&P was up 0.2% to 1638 (rounded) at the close.
VIX was up 2% to 16.81.

The Pros sold late in the day and VIX went up, so maybe traders are preparing for the return of market participants.  Volume has been 10-20% below normal this week, depending on the day, so we can’t place too much value in any of this week’s data.

The 10-day moving average of stocks advancing on the NYSE broke up to 49% at the close Thursday, a big improvement over yesterday.  Any number below 50% suggests trouble for the market.

New-lows slightly outpaced new-highs today leaving the spread at -4 (it was -43 yesterday), with the 10-day moving average of change in spread now up. 

Today’s reading of Internals is mixed so let’s wait and see what happens next week.  The pre-Holiday trading has been slow and choppy with almost daily reversals.

Thursday, 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.