“U.S. service-sector business activity picked up in October and firms took on workers despite a partial government shutdown, but new order growth slowed for a second straight month, an industry report on Tuesday showed. The Institute for Supply Management said its services index rose a point to 55.4 last month. Economists had expected it to slip to 54.0. A reading above 50 indicates expansion.” Full story at…
http://www.reuters.com/article/2013/11/05/us-usa-economy-services-idUSBRE9A40P620131105
Briefing.com noted that “The market generally doesn't pay
much attention to the services index because the services sector is less
cyclical than the manufacturing sector.”
http://www.briefing.com/Investor/Calendars/Economic/Releases/napmserv.htm
GASOLINE
I paid under $3
per gallon on a promotion last week.
Doug Short tracks gasoline prices and his latest update shows the
average price around $3.25 for regular. That is good for the economy, but the
reduction is very seasonal. See the
following for a detailed report… http://advisorperspectives.com/dshort/updates/Gasoline-Update.php
BACK OF THE ENVELOPE COSTS (Gas & Healthcare)
Some back-of-the-envelope calculations show that a $0.50
reduction in gas price frees up roughly $50-billion for the economy per year
(100-million drivers x 20,000 miles driven annually x $0.50 per
gallon/20mpg). Unfortunately, health
care increases are likely to be a 50-billion drag on the economy starting in
January (100-million paying for insurance x $2,700 per policy annually x 20%
increase (guesstimate of Affordable Care Act impact) = $50-billion).
STERNLICHT: STOP THE TAPER, PLEASE (CNBC)
“I want them to stop…they should knock this off. This is
bad. This is a heroin addiction. The more you get on it, the worse it's going
to get… and this is not smart and you get to the race…now that we think the
Europeans might have to respond to this. It's one thing when we had a $1
trillion deficit and we were printing $1 trillion now we have a $650 billion
deficit and still doing $1 trillion of paper. It's even more accommodative than
it was last year.” - Barry Sternlicht,
founder, chairman and CEO of Starwood Capital Group. Video at… http://video.cnbc.com/gallery/?play=1&video=3000214647
SENTIMENT:
Sentiment continues to be at extreme, high-levels. The percent-bulls value I track (based on a
ratio of assets in selected long/short, Rydex/Guggenheim funds) was again
72%-bulls at the close Monday leaving the 5-day moving average (5-dMA) at 71%. That’s
7-straight days with the 5-dMA over 66% and the 4th- straight day when
the value closed above 70% on the day.
When there are numerous extreme bullish-days clustered together like this, it usually means a correction is underway. Sentiment tends to peak after the top as traders buy-the-dip, but not so this year. Corrections have been mostly missing in the 2013 QE-era as investors continue to get more bullish and buy the dips more aggressively. Looking back we can see that similar conditions in May of 2012 resulted in a correction of 10%. The market is elevated by other measures too.
The S&P 500 was 9.4% above the 200-dMA 5-days ago at
the Top and that is also about where corrections have started in the past.
It could break this time, but with QE, who knows? Market internals have been deteriorating and
switched to negative today. Check the
Market Internals section below.
ANOTHER SENTIMENT VIEW: Why It’s Time to Sell - Anthony
Mirhaydari
“Jason Goepfert at Sentiment Trader notes that the
sentiment of newsletter writers like me has reached levels that haven't been
seen since at least 1997, active investment managers are carrying their
heaviest load of market risk in seven years, and the ratio of assets in Rydex's
bull and bear funds has reached levels preceding the last three market
corrections. Given all of this, I'm recommending clients book profits in long
positions, raise their cash allocations, and look for opportunistic short
plays…” - Anthony Mirhaydari is a columnist and blogger for MSN Money who
writes on stocks and the economy. He is also the founder and publisher of the Edge,
an investment advisory newsletter. Full
blog at…http://www.marketwatch.com/story/why-its-time-to-sell-2013-11-04
MARKET REPORT
Tuesday, the S&P was down 0.3% to 1763 (rounded).
VIX was up about 3% to 13.27. Tuesday, the S&P was down 0.3% to 1763 (rounded).
MARKET INTERNALS (NYSE DATA)
Volume was about 10% below normal Monday, but it bounced
back to the monthly average on Tuesday’s down day. The index was also down in the last hour Tuesday
which negates yesterday’s thought that late-day buying was a good sign.
The 10-day moving average of stocks advancing fell today
to 48%. (A number below 50% for the
10-day average is generally bad news for the market.)
New-highs outpaced new-lows, Tuesday, leaving the spread
(new-hi minus new-low) at +100 (it was +132 Monday). The 10-day moving average of change in the
spread was up to minus-31. In other
words over the last 10-days, on average, the spread has declined by 31 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 larger than down. Other NTSM indicators are neutral.
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.
