O
“The iPath S&P 500 VIX Short-Term Futures Note has been hitting all-time lows recently, but traders apparently believe that further downside will be limited. ..The put selling is setting floors of $46 and $44.50 for the VXX and are therefore betting that volatility will pick up.” Story at…
http://finance.yahoo.com/news/trades-see-end-slide-vxx-081655787.html
IF ONE PLACES FULL WEIGHT ON THIS RECENT PERIOD, AND NO
WEIGHT ON HISTORY, IT FOLLOWS THAT STOCKS CAN ONLY ADVANCE FOREVER (Hussman
Funds)
The problem with bubbles is that they force one to decide
whether to look like an idiot before the peak, or an idiot after the peak.
There’s no calling the top, and most of the signals that have been most
historically useful for that purpose have been blaring red since late-2011. … the Shiller P/E (the S&P 500 divided by the 10-year average of inflation-adjusted earnings) is now above 25, a level that prior to the late-1990’s bubble was seen only in the three weeks prior to the 1929 peak.
… the price/revenue ratio of the S&P 500 is now double its pre-bubble norm, as is the ratio of stock market capitalization to GDP.
…the median price/revenue ratio of the S&P 500 is actually above the 2000 peak
…the market has now re-established the most hostile overvalued, overbought, overbullish syndrome we identify. Outside of 2013, we’ve observed this syndrome at only 6 other points in history: August 1929 (followed by the 85% market decline of the Great Depression), November 1972 (followed by a market plunge in excess of 50%), August 1987 (followed by a market crash in excess of 30%), March 2000 (followed by a market plunge in excess of 50%), May 2007 (followed by a market plunge in excess of 50%), and January 2011 (followed by a market decline limited to just under 20% as a result of central bank intervention). – John Hussman, PhD, November 11, 2013 Weekly Market Commentary, Hussman Funds at
http://www.hussmanfunds.com/
Here’s another QE critic – this time from a former senior
Fed official.
CONFESSIONS OF A QUANTITATIVE EASER (Wall Street Journal)
“Over five years,
its bond purchases have come to more than $4 trillion. Amazingly, in a
supposedly free-market nation, QE has become the largest financial-markets
intervention by any government in world history. And
the impact? Even by the Fed's sunniest calculations, aggressive QE over five
years has generated only a few percentage points of U.S. growth.” – Andrew
Huszar, a senior fellow at Rutgers Business School, is a former Morgan Stanley
managing director. In 2009-10, he managed the Federal Reserve's $1.25 trillion
agency mortgage-backed security purchase program. Full story at…http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884
NO TAPER (Advisor Perspectives)
Doug Short had a good post from Michael Lombardi
regarding the latest jobs report from last week. In a nutshell, the post said that the latest
jobs report was terrible due to workers leaving the workforce. It predicted no taper in the foreseeable
future.
“Looking at this jobs market report, which I'm sure the
Federal Reserve is analyzing very closely, it only makes the Fed's decision not
to start tapering (not to pull back on monthly paper money printing) even
stronger.” Story at…
http://advisorperspectives.com/dshort/guest/Michael-Lombardi-131111-Worst-Jobs-Report.php
MARKET REPORT
Tuesday, the S&P was down 0.2% to 1768 (rounded).
VIX rose about 2% to 12.82.Tuesday, the S&P was down 0.2% to 1768 (rounded).
The S&P 500 re-touched the top at 1772 yesterday, but
the internals are negative and trending down. In addition,
I listed several issues that looked negative for the markets in the “Small
Investors Buying” section yesterday and I mentioned that it looked like a top
or mini-top as we have seen regularly over the past several months.
As a result, I expect the index to retreat about 5% (that
would be the lower trend line) or perhaps to the 200-dMA (a 9%-drop). Of course
there is always the possibility of more, depending on the taper rumors or some
other news.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 43%
at the close Tuesday. (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 +61 (it was +91 Monday). The 10-day moving average of change in the
spread was minus-15. In other words over
the last 10-days, on average, the spread has decreased by 15 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
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.
