Friday, October 11, 2013

Debt Ceiling Talks Continue

“White House Press Secretary Jay Carney says Obama and House Speaker John Boehner spoke by phone Friday, after officials said House Republicans offered to pass legislation to avert a default and end the 11-day government shutdown.

Their proposal to end the stalemate would include cuts in benefit programs and changes to Obama's health care law….Carney…reiterated that Obama believes the debt ceiling should be lifted without ties to budget negotiations…Obama held discussions with Senate Republicans at the White House Friday morning.

Meanwhile, officials say House Republicans are offering to pass legislation to avert a default and end the partial government shutdown as part of a package that includes cuts in benefit programs.”  Story and video at…

On its surface, the above story doesn’t look much change.  In the end though, the Republicans will have to pass a “clean” bill to increase the debt at least for the next 6-weeks.   Obama will have to negotiate on some Republican demands, most likely related to debt reduction.  It does look like Obamacare is no longer the main thrust of House Republicans.  That was plain in Ryan’s piece in the Wall Street Journal where he called for spending cuts; reform the tax code; modest reforms to entitlements and other proposals.  Here’s Ryan’s WSJ piece: “PAUL RYAN: HERE’S HOW WE CAN END THIS STALEMATE” at

“…Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth…So even though a reduction in government borrowing and spending does help the economy, it won't feel very helpful tomorrow. The more we borrow and spend today, the more we will suffer tomorrow when the bills come due…We can choose to pay now or try to pay later. But the longer we wait the steeper the bill.”  Commentary at…

Friday, the S&P finished up 0.6% to 1703 (rounded) at the close.  (The down days of the last 3-weeks have been erased in 3-days.)
VIX fell 5% to 15.72 and the fear ended quickly.

Internals were again positive on the day and the 10-day moving average of stocks advancing climbed to 49%. (A number below 50% for the 10-day average is generally bad news for the market.) 

New-highs outpaced new-lows Friday, leaving the spread (new-hi minus new-low) at +82 (it was +82 Thursday).  The 10-day moving average of change in the spread is +11. That just means that over the last 10-days, the spread has been getting better and we know that that’s actually all in the last 3-days.

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

The overall long-term NTSM analysis remained HOLD at the close. 

I suggested a few days ago that I wanted to get back in the market because, so far, I have missed the back half of this year’s gains.  With the sudden rise in the S&P 500 (because of the debt news) the opportunity disappeared.  At this point, the current NTSM system is not yet calling a buy.  The VIX needs to fall more and the markets need to continue their advance to push the on-balance volume higher.  Sentiment is high, but not yet high enough to block other indicators.  So as frustrating as it may be, I will wait for a better opportunity.  If earnings stall as many predict, being out of the market may turn out for the best. 

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.