Thursday, October 24, 2013

Jobless Claims Disappoint…Manufacturing Slows (PMI)

JOBLESS CLAIMS HIGH; MANUFACTURING SLOWS (Reuters) - The number of “Americans filing new claims for unemployment benefits fell less than expected last week, but a lingering backlog of applications in California makes it difficult to get a good read of labor market conditions…’Underlying labor market conditions probably are not as bad as the recent claims data suggest,’ said Daniel Silver, an economist at JPMorgan in New York… In a separate report, financial data firm Markit said its ‘flash,’ or preliminary, U.S. manufacturing Purchasing Managers Index fell to 51.1, the lowest since October 2012, from 52.8 in September.”  Story at…

“American adult proficiency in literacy, numeracy and problem solving ranks as some of the lowest among developed countries, despite a relatively high level of education, according to a recent survey.  In literacy, the United States came in 9th out of 13 industrialized countries surveyed, according to a report from the Organization for Economic Cooperation and Development.”  Story at…

My wife teaches so I am all too familiar with the declining abilities of students and standards of education.  Oddly, a major problem is counter-intuitive.  Federal money is distorting education with disastrous results.  Federal funds are tied to standards of Learning (SOLs), i.e., standardized testing based on the policy of “no-child-left-behind.”  That policy requires that the ALL students pass SOLs and graduate from high school; therefore, many states have nearly eliminated vocational learning.  So kids that have neither the aptitude nor the inclination to do well in schools can’t easily go to a trade school.  (That’s one reason why local contractors couldn’t find brick-masons a few years ago and that slowed several construction projects our organization managed.) 

Since kids must pass (otherwise teachers are punished), many of the school systems in my area have made it official policy to no longer give zeros for missing work.  50% is the minimum grade.  This gives lazy kids a chance to catch up late in the year.  Teachers also dumb-down curriculum in other ways.  There is no credit for having exceptional students – only punishment for failure to keep the SOL passing rates at minimum levels.

Those that end up in summer school are passed on so the school system can meet the Federal requirements, too.  A good friend of mine taught summer school last year.  He had a Senior repeating English.  The kid came to 1/3 of the sessions and did no work.  My friend was directed to pass him anyway.  If your numbers go down, you don’t get the Federal dollars.

While schools would be better off being funded without strings attached, in the end, the bigger problem is lack of parenting that leaves students rudderless.

Thursday, the S&P was up 0.3% to 1752 (rounded) at the close.
VIX fell about 2% to 13.2.

The 10-day moving average of stocks advancing has dropped to 62%.  (A number above 50% for the 10-day average is generally good news for the market.) 

New-highs outpaced new-lows Thursday, leaving the spread (new-hi minus new-low) at +200 (it was +135 Wednesday).  The 10-day moving average of change in the spread fell to plus 12. 

Market Internals remain Positive on the market for this short term indicator.


NTSM system is BUY again today, but I still expect a pullback, though it may not be a big decline.  Some issues are: Market Internals are still positive, but they seem to be rolling over; the Fed meeting may cause a little fear; the market action is overly bullish (8 of the last 10 days have been up); the S&P 500 is 8.5% above its 200-dMA and 10% is usually the break point, so a small pull back is warranted.  There are certainly enough issues that could indicate a larger decline; there just isn’t an obvious catalyst. (Duhhhh; it’s never obvious.)

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.