FED TO MAINTAIN
INTEREST RATES LONGER (Bloomberg)
“William English, head of the Division of Monetary Affairs, wrote that the strategy of
not raising interest rates if unemployment is above 6.5 percent has provided effective
stimulus, and that an even lower threshold could be helpful”……“Our initial assessment is that they [the new Fed research] considerably increase the probability that the FOMC will reduce its 6.5 percent unemployment threshold for the first hike in the federal funds rate,” Jan Hatzius, chief economist of Goldman Sachs Group Inc., wrote in a note to clients yesterday, referring to the two studies. Such a move would happen before or “coincident” with the first tapering of quantitative easing, Hatzius said.” Story at…
http://www.bloomberg.com/news/2013-11-06/u-s-economy-slack-justifies-stimulus-top-fed-staff-papers-show.html
So to temper the
sting of Tapering QE, the FED will announce a longer time-frame for low
interest rates. This looks meaningless
to me. The key move is the QE Taper; not
interest rates. The Fed may be getting
concerned that the number of QE critics is getting much bigger and more vocal
too. Taper in December? It's anyone's guess.
BOB JANJUA:
BUBBLE STILL BUILDING (via ZeroHedge)
“…I
still see end Q4 2013, through to end Q1 2014, as the window in which we see a
significant risk-on top before giving way, over the last three quarters of 2014
and through 2015, to what could be a 25% to 50% sell-off in global stock
markets. From a LEVEL perspective, my 1800 target for the S&P into the
aforementioned ‘peak’ time window (Q4 2013/Q1 2014) has pretty much already
been hit. As I expect marginal higher highs before the big reversal, and while
my target for this high in the S&P over the next five months remains
anchored around 1800, an ‘extreme’ upside target could see the S&P trade up
to 1850. Put it another way – before we see any big risk reversal over 2014 and
2015, we need to see more complacency in markets. I am looking – as a proxy guide – for
the VIX index to trade down at 10 between now and end Q1 2014 before I would
recommend large-scale positioning for a major risk reversal over the last three
quarters of 2014 and over 2015." Full story at...SENTIMENT – STUBBORNLY HIGH
I’d love to jump back in the market, but overly bullish sentiment has stopped me for some time and it just keeps getting worse. Tuesday (this data is always a day late), my measure of sentiment showed that 76% of investors were betting long at the close in the Rydex long/short funds I track. That brought the 5-day value that I use in the NTSM system to 74-% bulls. That’s the highest value I have seen looking at data all the way back to July 2009.
BUY-THE-DIP
There
has been a pattern that repeated today.
When the market has been choppy for a few days and the internals have
gone negative (hinting at correction), the market has frequently reversed to
the upside. The “invisible hand” strikes
again! The invisible hand would be the buy-the-dip crowd and the newbies who
have (in some cases) missed this 5-year rally.
I am tempted to throw-in-the towel and buy; but sentiment just says
don’t do it. Risk-reward isn’t great
either.
Here’s
a way of looking at risk-reward. If you
believe Janjua’s analysis, then the S&P 500 is 2% from his expected high
and 5% from his estimate of a possible 1850 extreme high. My thinking is that the downside varies from
10% down near-term to much worse sometime in 2014. It looks like downside-risk outweighs
upside-risk.
DAYS OF STOCK MARKET IRRATIONALITY NUMBERED
(Michael Lombardi via dShort.com)
“The fourth quarter has just begun, but we have already
started to hear from companies on the key stock indices. They are outright
worried. As of November 1, 79 companies on the S&P 500 have issued guidance
about their corporate earnings; more than 83% of them expect their corporate
earnings growth to be negative! (Source: FactSet,
November 1, 2013.) As I continue to say
in these pages, the days of stock market irrationality are numbered and
eventually, reality will strike key stock indices. My take is that the longer
the stock market rally continues, the bigger the fall is going be. Stock prices
have skyrocketed and investors have taken on too much leverage. A little market
correction can lead to a much bigger sell-off. Be very careful with the stock
market!” Full story from Advisor
Perspectives at…http://advisorperspectives.com/dshort/guest/Michael-Lombardi-131106-Market-Irrationality.php
MARKET REPORT
Wednesday, the S&P was up 0.4% to 1770 (rounded).
VIX fell about 5% to 12.67. Wednesday, the S&P was up 0.4% to 1770 (rounded).
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing was up
slightly today to 49%. (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 +146 (it was +100 Tuesday). The 10-day moving average of change in the
spread was up to plus 1. In other words
over the last 10-days, on average, the spread has increased by 1 each day.
Market Internals are a decent trend-following analysis of
current market action, but should not be used for short-term trading except
perhaps to augment another system.
NTSM ANALYSIS
Sentiment is negative. Price is positive, since up-moves have been
bigger than down-moves recently. Other
NTSM indicators are neutral. Overall, NTSM is neutral. That is a broken record.
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.
