Monday, September 30, 2013

Government Shutdown – So What?

Question: How has the market reacted during previous Government Shutdowns? 
Answer: Not much.
Chart from ZeroHedge at...

DEBT LIMIT? So what?
Regarding the debt limit, on average: the S&P 500 was down 1%, 5-days before the debt limit was raised and up 0.3%, 5-days after it was raised.  The debt limit has always been raised.  If the debt limit isn’t raised, we could expect a lot more downside.  Chart at…
Monday, the S&P finished down 0.6% to 1,682 (rounded) at the close.
VIX was up 7% to 16.60.

The 10-day moving average of stocks advancing on the NYSE fell to 51% Friday from 53% at the close Friday.  (A number above 50% for the 10-day average is generally good news for the market, but this number has been falling consistently for the last 8-sessions and that's not good. 

New-highs outpaced new-lows Monday, leaving the spread (new-hi minus new-low) at +30 (it was +45 Friday).  The 10-day moving average of change in the spread is minus 15. That just means that over the last 10-days, the spread has been getting worse.

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

Monday, the overall long-term NTSM analysis remains HOLD at the close, but the numbers are so close to a Sell that I could easily just call it a sell – no surprise there given the recent market action.

The 5-day, percent-bulls (bulls/(bulls+bears) in the Guggenheim/Rydex funds I track remains 67%-bulls as of Friday’s close. That is an extreme bullish value that is usually a negative for the markets. 

VIX is now rising at an alarming rate suggesting the Options crowd is finally getting worried about the market.

Still, with QE full on, if I see any signs of a turn-around, I’ll be a buyer of stocks to bring my invested percent up to 50%.  So far, there is little to suggest that this is anything other than a normal correction, regardless of the cause.

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.