“Japan has receded from the headlines of late but that's about to change. In the next two months, it's expected the Prime Minister Shinzo Abe will make a decision on whether to increase Japan's consumption tax from 5% to 8% in April next year. If approved, consumer spending will take a significant hit and given that it accounts for around 60% of GDP, hopes for an economic recovery could be dashed. If the tax hike is delayed on the other hand, rating agencies are likely to downgrade Japanese debt, resulting in increased interest costs - the last thing that the massively indebted country needs. International investors would also lose faith in Japan's turnaround strategy. Either way, it appears a lose-lose situation.
Much less talked about is the impact on Japan from possible
QE tapering in the U.S…[and that may cause rates to rise world-wide]…only a
small rise in rates would result in its government debt burden becoming
overwhelming - interest rates increasing to just 2% would mean interest expense
on government debt equating to 80% of government revenue.
Either of these events may bring forward a Japanese
sovereign debt crisis...Unlike Greece or Cyprus, Japan matters. It's the
world's third largest economy and a key trading partner to all of the large
powers. How Japan plays out for the remainder of 2013 will be of critical
importance to everyone.” Story at…
http://www.kitco.com/ind/Gruber/2013-08-12-A-Japanese-Crisis-Nears.html
ICELAND – EUROPE’S TICKING TIME BOMB (Fortune)
"The inevitable unmasking of Iceland's dubious economic
recovery could have severe consequences for the rest of Europe. Since 2008, the
small island nation has been able to avoid an all-out economic meltdown thanks
largely to government-imposed capital controls that have kept its currency from
imploding. At the same time, the nation's zombie banks have managed to avoid
total collapse thanks to delay tactics that have allowed them to avoid settling
with their creditors.
But the walls the government and its banks erected to
shield its population from the outside elements have finally started to
crumble. Unfortunately, there is not much Iceland can do to save itself at this
point; it will need to face the music eventually. The bigger concern is what
impact another Icelandic currency crisis could have on Europe in the months ahead.
After all, Iceland's spectacular collapse in 2008
helped set the European debt crisis in motion as it exposed weaknesses in the
region's banking system. Another Icelandic meltdown could easily reignite
investor fears, leading to yet another panic on the continent…investors will be
watching what Iceland's new government does intently. If it begins to falter,
the rest of Europe could be next.” Story
at…
http://finance.fortune.cnn.com/2013/08/12/iceland-is-europes-ticking-time-bomb-again/?iid=HP_LN
Just when the news from Europe has been getting
better.
MARKET REPORT
Wednesday, the S&P was down 0.5% to 1685 (rounded).
VIX was UP 6% to 13.04.Wednesday, the S&P was down 0.5% to 1685 (rounded).
The S&P 500 is about 2% above the 50-dMA, now at 1655. That is a point that traders will be watching
for support.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks
advancing on the NYSE fell to 45% at the close.
Usually a value below 50% signals additional trouble for the markets. For the day only 32% of stocks advanced.
New-lows of 236 outpaced the new-highs of 92
today leaving the spread at -144 with the 10-day change in spread heading down.
Today’s reading of Internals is negative on
the market and suggests the market is likely to continue its downward trend.
NTSM
Wednesday, the overall NTSM analysis was HOLD
at the close.
Indicators follow:
VIX switched to neutral today.
PRICE is positive.
SENTIMENT remains negative. The 5-day sentiment value is 65%-bulls, based
on funds invested in Guggenheim/Rydex funds that I track. That’s still an extreme bullish value and
that is generally negative for markets.
VOLUME
remains neutral.
MY INVESTED POSITION
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.
