Wednesday, September 18, 2013

NO TAPER! FED Continues QE at 85-billion per month

No taper? Shock and awe…Bob Pisani of CNBC was nearly speechless. “I’m completely flabbergasted,” he said.

“The Standard & Poor’s 500 Index climbed to a record high after the Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs to see more evidence of improvement in the economy…The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.” Story at…

“FED refrains from QE taper, keeps monthly buying at $85-billion
FED: Rise in mortgage rates, fiscal policy restrain growth
FED: Tightening of financial conditions could slow growth
Most FED officials see first interest rate rise in 2015.”
Story at…

“It looks like the Fed has done a major reset in terms of expectations on what they need to see before they start to taper,” said Chris Rupkey, the chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York…Fed officials today reduced their forecasts for economic growth this year and next. They forecast U.S. gross domestic product to increase 2 percent to 2.3 percent this year, down from a June projection of 2.3 percent to 2.6 percent growth.”  Story at…

“U.S. chief executives were less optimistic about the economy in the third quarter, with fewer expecting to increase sales or boost capital spending than in the preceding three months, a survey by the Business Roundtable showed…"While U.S. business performance remains strong, as evidenced by robust recovery in the automotive sector, business leaders still see headwinds preventing a more sustained, robust recovery," said Jim McNerney, chairman of Business Roundtable and chairman and CEO of Boeing Co (BA.N).  CEO expectations for 2013 gross domestic product growth was 2.2 percent, unchanged from the last quarter.”  Story at…

Wednesday, the S&P finished up 1.2% to 1726 (rounded) at the close.
VIX fell 6% to 13.59.

The S&P 500 is now 9% above its 200-dMA.  Even after the taper news today the market may not have too much more upside left.  10% above the 200-dMA has been the trouble zone for the S&P 500, but it may manage to get a couple of percent higher now that QE will continue to solve all problems.

The 10-day moving average of stocks advancing on the NYSE was 62% at the close.  (A number above 50% for the 10-day average is generally good news for the market.) 

New-highs outpaced new-lows today, Wednesday, leaving the spread (new-hi minus new-low) at +288 (it was +123 Tuesday), with the 10-day moving average of change in spread strongly positive. 

The Internals are positive on the market in the short term.

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

With no taper, everyone seems convinced the markets are headed up.  As I noted a few days ago; when everyone thinks the market is going to go one way, it will go the other.  The pros seem conflicted since the last hour of trading has been down over the last 5, 10 and 40-day periods.  The Index was down today in the last hour too.

The market has been up 9 out of the last 10-days so it is overdue for some down time.  Today was a statistically significant up-day based on price and volume.  Statistically significant up-days are usually followed by a down day or several for that matter.  So it looks like the market has some issues and will likely trend down in the short term, but it may need to get a couple percent higher before there is a better chance for a meaningful correction.

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.