Earnings: “With 89% of the companies in the S&P 500
reporting actual results, the percentage of companies reporting earnings above
estimates is equal to the four-year average…In aggregate, companies are
reporting earnings that are 1.8% above expectations…If 1.8% is the final
surprise percentage for the quarter, it will mark the lowest surprise
percentage since Q4 2008 (-62%).”
Guidance: “…the percentage of companies issuing negative
EPS guidance to date for the fourth quarter is 86% (73 out of 85). This
percentage is well above the 5-year average of 63%.”
Valuation: “The current 12-month forward P/E ratio is
14.7…The P/E ratio of 14.7 for the index as a whole is above the prior 5-year
average forward 12-month P/E
ratio of 13.0, and above the prior 10-year average
forward 12-month P/E ratio of 14.0.”
Full report from FACTSET at…
ZEROHEDGE CHIDES CNBC’S DENNIS GARTMAN (Zerohedge)
“The "commodity king" author of the "world
renowned" Gartman
‘Now with the S&P forging a
massive reversal to the downside, we not only must abandon being bullish we
must become bearish... and very so....’ – Dennis Gartman”
Story from ZeroHedge at…
ZeroHedge is a little over the top on occasions. There were several articles posted the same
day that agreed with Gartman, but I guess they didn’t like it that he has
varied his position over the last several months. Only a fool doesn’t change his opinion when
faced with new facts and Dennis is a trader who must be flexible.
I don’t travel in the same circles as Dennis Gartman, but I did run into him about town not long ago. He is a genuinely nice person and he graciously chatted with me for 10 or 15-minutes.
At present we agree…this market looks very dangerous. From
the 8 November Gartman Letter (posted at ZeroHedge): “…one might consider going
risk off for a while.”
SMALL INVESTORS BUYING
There has been a lot of discussion recently in the press
about mom-and-pop investors coming back into the stock market. The talk is that it is a bad sign. I agree.
Net inflows into long-term domestic mutual funds have been rare over the
past 5-years, but it has been a fairly consistent phenomenon in recent
months. There were net inflows around
the top 21 May; around the top 2 Aug; around the top 18 Sep; and around the top
29 Oct. Inflows have increased at each
top. Otherwise, flows have been
negative.
I’d say the S&P 500 made another top 29 Oct based on
several issues: (1) the pattern of small higher-highs roughly a month apart;
(2) the S&P 500 9.4% above the 200-day moving average at the 29 Oct top; (3)
Friday was a statistically significant up day; (4) and the internals remain neutral
to negative. So far these little dips have been about 5% down, but a bigger
move is overdue.
MARKET REPORT
Monday, the S&P was up 1pt. to 1772 (rounded).
VIX fell about 3% to 12.53.
Today was a light volume day (about 25% below the monthly
average) because of the Holiday.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing was 46% at
the close Monday. (A number below 50%
for the 10-day average is generally bad news for the market.)
New-highs outpaced new-lows, Monday, leaving the spread
(new-hi minus new-low) at +91 (it was +55 Friday). The 10-day moving average of change in the
spread was minus-8. In other words over
the last 10-days, on average, the spread has decreased by 8 each day.
Market Internals remain negative.
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.
