Wednesday, September 4, 2013

FED Beige Book…World Growth Picking Up…Stock Market History

(I revised this blog-post to fix a typo as follows: "I remain unconvinced that we are out of the woods...)

BEIGE BOOK (Bloomberg)
“Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said today.  Manufacturing expanded “modestly” and consumers spent more on travel and tourism, the Fed said today in its Beige Book business survey, which is based on anecdotal reports from its 12 districts. Hiring “held steady or increased modestly.”
…“Growth isn’t accelerating and there’s no escape velocity that some members would like to see” before tapering, said Yelena Shulyatyeva, a New York-based economist at BNP Paribas SA, a primary dealer that trades government securities directly with the Fed.”  Story at…

Euro zone businesses had their best month in over two years in August as orders increased for the first time since mid-2011 while growth in China's services sector hit a five-month high, underpinned by new orders and business optimism...Italian services also contracted more than expected and the downturn continued in France.
…Emerging economies are particularly vulnerable to a tightening of United States monetary policy, the International Monetary Fund warned in a note prepared for the Group of 20 meeting in St. Petersburg this week.”  Full story from Reuters at…

“At the end of August the S&P 500 index price was 66% above its long-term trend…About the only certainty in the stock market is that, over the long haul, over performance turns into under-performance and vice versa.” – dShort, Advisor Perspectives.”  Full commentary and analysis at…
Chart from at

“’…Harvard economist Martin Feldstein, President emeritus of the
National Bureau of Economic Research – and among the few economists who warned in 2007 of an impending recession and credit crisis – recently observed:
“The danger of mispricing risk is that there is no way out without investors taking
losses. And the longer the process continues, the bigger those losses could be. That’s why the Fed should start tapering this summer before financial market distortions become even more damaging.’”  Excerpted from the “Hussman Funds 2013 Annual Report” by John Hussman, PhD.  Annual Report available at…

Wednesday, the S&P was up 0.8% to 1653 (rounded) at the close. 
VIX was down 4% to 15.90.

The Index is at or near the top of its upper trend line, so unless it reverses soon (as I expect), I’ll need to revise my thinking..

The 10-day moving average of stocks advancing on the NYSE remained 52% at the close Wednesday.  A number above 50% is generally good news for the market.

New-highs outpaced new-lows today leaving the spread at +33 (it was -5 Tuesday), with the 10-day moving average of change in spread still trending up. 

Today’s reading of Internals is positive for the markets.  I remain unconvinced that we are out of the woods.

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.