”…we continue to view economic activity as much closer to the border of recession than is widely appreciated. New unemployment claims tend to reach their lows at bull market highs, and are not useful as forward-looking indicators. Moreover, we’ve observed a collapse in the correlation between historically more reliable leading measures (purchasing managers indices, Fed surveys) and subsequent economic outcomes over the past few years (see When Economic Data is Worse than Useless). Probably the most straightforward approach is to cut straight to key measures such as real GDP and real final sales, where year-over-year growth is already below the levels at which recessions have typically started. Given the predictive breakdown in a whole host of measures, it’s not clear that we should draw strong predictive conclusions from this evidence either. Still, it should be evident that the U.S. economy remains at levels of activity that have historically bordered recession. Doug Short always offers useful perspective on a wide range of data. The chart below is no exception.” - John Hussman, Phd. Weekly Market Commentary from Hussman Funds at…
http://www.hussmanfunds.com/wmc/wmc131014.htm
http://www.advisorperspectives.com/dshort/
22 REASONS TO BE CONCERED ABOUT THE US ECONOMY…(ZeroHedge)
A few of the 22 follow:
“#1. According to Gallup, we have just seen the largest drop in U.S. economic confidence since 2008.
#8. Overall, corporations announced the elimination of 387,384 jobs through the first nine months of this year.
#9. The number of announced job cuts in September 2013 was 19 percent higher than the number of announced job cuts in September 2012.
#17. Obamacare is causing health insurance premiums to skyrocket and this is reducing the disposable income that consumers have available.
#18. Median household income in the United States has fallen for five years in a row.”
Commentary from ZeroHedge at…
http://www.zerohedge.com/news/2013-10-14/22-reasons-be-concerned-about-us-economy-we-head-holiday-season
IS THE MARKET ANTICIPATING RECESSION? (NTSM)
I follow the spread between the S&P 500 and the
Morgan Stanly Cyclical Index (calculated on a percentage basis) to track the
market’s recession concern since cyclical stocks are more recession sensitive. Over the last 2-weeks the cyclical stocks
have underperformed the S&P 500, but not by much. Over the longer term cyclicals are
outperforming the S&P 500. The short
answer is: Market participants currently are not anticipating a recession.
NO TAPER SAYS FED HAWK (CNBC)
“One of the Federal Reserve's most outspoken critics of
asset purchases has essentially given up hope for a policy change at a meeting
later this month in light of the fiscal standoff in Washington… "My
personal opinion is that it's not in play," Richard Fisher, president of
the Federal Reserve Bank of Dallas, said of the possibility that the central
bank will reduce its quantitative-easing program at an Oct. 29-30 policy
meeting.” Story at…http://www.cnbc.com/id/101113890
MARKET REPORT
Tuesday, the S&P finished down 0.7% to 1698 (rounded) at the close.
VIX rose 16% to 18.66 so the options market seems much
more worried than the stock market…at least for today, Tuesday.Tuesday, the S&P finished down 0.7% to 1698 (rounded) at the close.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell
sharply to 46% from yesterday’s reading of 51%. (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 +93 (it was +161 Monday). The 10-day moving average of change in the
spread is minus 8.
Market Internals are now negative on the market for this
short term indicator as today we had a quick whipsaw change in direction on the
internals. Depending on the Politicians
it would be easy to forecast a dramatic turn up or a crash. Why bother?
Who knows what those clowns will do.
NTSM
The overall long-term NTSM analysis remained HOLD at the
close.
I think once the debt ceiling is resolved we will see a
bounce followed by losses – basically a “buy the rumor; sell the news”
reaction. In the end we’ll have to see
how the market reacts to make any longer term decisions.
MY INVESTED POSITION
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.
So far in 2013, the NTSM system has not performed
well. NTSM has earned 10% vs. a buy and
hold system that would currently be up 23%.
Why?
I’d say that’s the result of multiple QE by the FED for
which there is no precedent.
