Wednesday, September 25, 2013

Threat of U.S. Default? Forgetaboudit Taper? Forgetaboudit

Analysis: Washington to Wall Street - Threat of default is real (Reuters) 
“Money lenders trust America so implicitly that they generally dismiss the risk it won't pay its debts. But in the U.S. capital, fears are growing that political dysfunction might trigger the unthinkable.”  Story at…

This just looks like fear-mongering to me.  If our bond payments are a little late…forgetaboudit…the check’s in the mail. 

“Edward Dempsey, chief investment officer of Pension Partners, said despite intense speculation over when the tapering will happen, in his view it could get pushed out for some time. ‘There's a school of thought that thinks maybe never,’ said Dempsey, referring to the potential onset of tapering.  ‘The Fed stared into the deflationary abyss and backed away. They are lowering their growth forecasts, they are telling us that economic growth going forward is weaker than they previously thought,’ he added.”  Story at…

I saw several similar stories with logic as follows:  The Fed won’t taper in October because the data won’t be materially different than September. Bernanke doesn’t want to Taper and tie the next FED chair’s hand so forget December. They won’t taper in the first meeting after Yellen (the presumptive choice for the new Fed chair)  takes over either.  Yellen is a QE supporter. So, Taper is way off. 

“…a close below 1700 (on the S&P 500) would confirm a near-term top and a correction to 1653…  Story from Zero Hedge at…

I am not really much of a chart guy, but there are times when some basic chart analysis is worthwhile.

The Index is now trading below its long-term lower trend line and that is bearish, especially after breaking back above the trend line in August.  The shorter term trend line is shown with red dashed-lines and it is much flatter than the previous trend so the upward movement has slowed appreciably.

The index has also breached the 1700 level and per the Bank of America article above, that is bearish too.

Chart from Yahoo Finance at…
Annotated by NTSM

Wednesday, the S&P finished down 0.27% to 1693 (rounded) at the close.
VIX fell 0.5% to 14.01.

The 10-day moving average of stocks advancing on the NYSE dropped from 54% to 53% 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 +83 (it was +112 Tuesday), but the 10-day moving average of change in the spread is still negative at minus 3. 

Similar to yesterday, I expect tomorrow to be an up-day.  51% of stocks advanced Wednesday at the close today and new-hi/new-low data was also positive on the day even though the index was down.  This is the 2nd day for this unusual occurrence.  The internals may carryover till tomorrow and push the S&P 500 up for the day.

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

The last hour of trading is when the Pros play and, in theory, that’s the smart money. In the last 10-days the S&P 500 index is up 0.23%.  Over the last 10-days the index has fallen 1.1% in the last hour of trading.  That divergence between the market and the pro’s opinion of the market may be a negative, but I still haven’t figured out if this is a valid indicator.

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

My sentiment indicator (5-dMA of %-bulls in selected Guggenheim/Rydex funds) hit 67% Wednesday at the close.  That’s a very high number and usually indicates trouble for the market.  With the FED still conducting full-on QE, it is hard to know if the indicator means anything.

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.