Friday, September 27, 2013

Consumer Confidence Down Slightly…Consumer Spending Up

Confidence among consumers declined to a five-month low in September as Americans’ views on the economy dimmed…The Thomson Reuters/University of Michigan final index of sentiment decreased to 77.5 this month from 82.1 in August…“Most surveys show that consumer confidence has softened in recent months,” Ryan Wang, a New York-based economist at HSBC Securities USA Inc., said before the report. “The reading is still higher than a few years ago, and that’s mostly due to higher home prices and gradual improvement in the labor market."  Story at...

I reported on this issue earlier, but here’s another note of concern regarding junk-bond/S&P 500 spread.

JUNK BONDS ARE SENDING A CONCERNING MESSAGE FOR STOCKS (Kimble Charting Solutions posted at Advisor Perspectives)
"If history is a good guide, the relative weakness of junk bonds compared to the S&P 500 is sending a concerning message about stock prices in the future."  Charts at at…

“U.S. household spending rose in August as incomes were buoyed by solid wage gains, signs that momentum could be growing in the U.S. economy despite months of harsh government austerity.  American families spent 0.3 percent more last month than the month before…Commerce Department data showed on Friday…"The pick-up in income growth in August suggests that consumption growth may even accelerate in the fourth quarter," said Paul Ashworth, an economist at Capital Economics in Toronto.” Story at…

Friday, the S&P finished down 0.41% to 1,692 (rounded) at the close.
VIX was up 10% to 15.46.

The 10-day moving average of stocks advancing on the NYSE fell to 53% Friday from 56% at the close Thursday.  (A number above 50% for the 10-day average is generally good news for the market.) 

New-highs outpaced new-lows Friday, leaving the spread (new-hi minus new-low) at +45 (it was +92 Thursday).  The 10-day moving average of change in the spread is plus 1. That just means that over the last 10-days, the spread has improved, but not much.

Market Internals are Positive on the market for this short term indicator.

Friday, the overall long-term NTSM analysis remains HOLD at the close.

The 5-day, percent-bulls (bulls/(bulls+bears) in the Guggenheim/Rydex funds I track is 67%-bulls as of Thursday’s close. (Friday’s values won’t be available until late tonight.)  That is an extreme bullish value that is usually a negative for the markets.

Most of the CNBC crowd are bullish on the markets and suggest buying the dip.  I’ll try to keep an eye out for clues that might show the market has made a meaningful bottom.  The S&P 500 is less than 1% above its 50-dMA and that has been a location when buyers have stepped in previously.  The index is 6% above its 200-dMA and, barring panic, is another area when buyers may step in. 
Perhaps the S&P 500 will finally see a correction, but not many believe that this is it. 

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.