The markets opened down, but the dippers moved in and the S&P 500 really powered up at the end of the day. The bullishness continues at extreme levels. The Bullish sentiment in Rydex/Guggenheim funds I track was 75%-bulls at the close Tuesday and the VIX remains low. There is no fear now. That’s a perfect condition for a correction start.
RISING INTEREST
RATES: SERIOUS LONG-TERM TROUBLE (CNBC)
“We think people are
going to be too short sighted on whether they're going taper in January or
February. The long view is [interest rates are] going to go higher and history
tells you when it happens, it's going to be challenging for the market. If you look at…interest rates over the last
60 years, interest rates went dead up from 63 till 1983 and stocks went
absolutely nowhere.
The Dow stayed at
700 in '63 and it was still at 700 in '83. Interest rates have dropped pretty
continuously since '83 and the Dow has gone from 700 to 1,700. It's not going to happen next month or two or
three months, but an increase in rates, which we see is coming, is going to be
a big challenge. We may have seen a
preview June that we would get a September taper that never materialized.” - Charles
Bobrinskoy, Ariel Investments. Video at
CNBC at...
http://video.cnbc.com/gallery/?video=3000217792&__source=yahoo%7cheadline%7cquote%7cvideo%7c&par=yahoo#eyJ2aWQiOiIzMDAwMjE3NzkyIiwiZW5jVmlkIjoibmtjb0k2d0tEMnJ4SFpQWjBlRFJhUT09IiwidlRhYiI6ImluZm8iLCJ2UGFnZSI6MSwiZ05hdiI6WyLCoExhdGVzdCBWaWRlbyJdLCJnU2VjdCI6IkFMTCIsImdQYWdlIjoiMSIsInN5bSI6IiIsInNlYXJjaCI6IiJ9
In spite of the Michael
Lombardi post at dShort.com where Michael suggested no taper for a long time. I
think the Taper is coming sooner rather than later. There are serious risks associated with
keeping QE at 85-billion per month.
Everyone has a guess…
PRO: JANUARY
TAPER
“We're looking
for perhaps taper in January depending on how the economic data play out. “ - Michael Feroli,
JPMorgan. Video at…
INVESTORS SPECULATE ON FED STIMULUS (Bloomberg)
“Joel Huffman,
senior portfolio manager for U.S. Bank Wealth Management’s private client
reserve, said by phone from Milwaukee…Reducing bond purchases “ought
to be on the table at upcoming meetings” by the Federal Open Market Committee, including
Dec. 17-18, Fed Bank of Atlanta President Dennis Lockhart said yesterday. Central bank
policy makers will probably scale back the monthly pace of bond buying to $70
billion at their March 18-19 meeting, according to the median of 32 estimates
in a Bloomberg survey of economists on Nov. 8. http://www.bloomberg.com/news/2013-11-13/u-s-stock-futures-fall-as-investors-weigh-fed-stimulus.html
The following
piece is mainly about the flat market and how it may breakout up or down Thursday; but
Art Cashin had an interesting take on the QE taper.
MARKET WILL HEAT
UP THURSDAY (CNBC)
Art Cashin had an interesting comment at the end of this
interview. He said that the thing the
Fed has to watch out for is that QE is catching blame for causing inequality in
America (QE helps Wall Street not Main-street) and if the FED let’s that build,
the Fed will be a political issue next year.
Video at… http://video.cnbc.com/gallery/?video=3000217705&__source=yahoo%7cheadline%7cquote%7cvideo%7c&par=yahoo#eyJ2aWQiOiIzMDAwMjE3NzA1IiwiZW5jVmlkIjoiUmxaSm9GN3JKUFI5cHZ6SlFwTU1Bdz09IiwidlRhYiI6ImluZm8iLCJ2UGFnZSI6IiIsImdOYXYiOlsiwqBMYXRlc3QgVmlkZW8iXSwiZ1NlY3QiOiJBTEwiLCJnUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ==
That is a big
reason why QE tapering will have to start soon.
I am not making a
political statement by posting the following piece. My point is simply that it will be bad for
the U.S. and the U.S economy if young-people opt out of Obamacare.
WHY A FAMILY OF
FOUR (WITH EXISTING COVERAGE) OPTS OUT OF OBAMACARE (Global Economic trend
Analysis)
“I believe the
Obama administration thought no one with existing coverage would opt out. But
when new "affordable" premiums are roughly 25-30% of a healthy, young
family's total income, what do they expect? Healthcare premiums should not be
the same percentage as a mortgage payment.”
Story at…http://globaleconomicanalysis.blogspot.com/2013/11/reader-explains-why-her-family-of-four.html
MARKET REPORT
Wednesday, the S&P was up 0.8% to 1782 (rounded).
VIX fell about
2% to 12.52.Wednesday, the S&P was up 0.8% to 1782 (rounded).
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 47%
at the close Wednesday. (A number below
50% for the 10-day average is generally bad news for the market.)
New-highs outpaced new-lows, Wednesday, leaving the
spread (new-hi minus new-low) at +120 (it was +61 Tuesday). The 10-day moving average of change in the
spread was minus-7. In other words over
the last 10-days, on average, the spread has decreased by 7 each day.
Market Internals were neutral at the close today.
Market Internals are a decent trend-following analysis of
current market action, but in 2013 (so far), if I had been buying the positive
ratings and selling negative ratings I would have under-performed a
buy-and-hold strategy.
NTSM ANALYSIS
Sentiment is EXTREME negative. All
other NTSM indicators are neutral. Overall, NTSM is neutral. That is a
broken record.
(I am mostly out of the market already.)
MY INVESTED POSITION (NO CHANGE)
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.
I still lean toward getting back in, after a pullback, to
speculate on a final ride to the top.
NTSM did give several buy signals over the weeks of 14 and 21 Oct, but
the market just looks too frothy to rush back in…we’ll see if the market will
pullback so I can join the insanity. If
not, cash is fine.
