“In a report released last month, Ms. Sonders cited three indicators — [1] the S&P 500′s rolling 10-year returns, [2] stock valuations and [3] the magnitude and the duration of the current rally compared to previous bull markets — as reasons for why the market wasn’t looking bubblicious…On Monday, she pointed to valuations that remain well below prior-bubble levels. The S&P traded at 28 times prior-year earnings at its peak in 2000, compared with a price/earnings ratio of 17 now. The Nasdaq Composite’s ratio was 142 at its peak, compared with 22 now.” Story at…
http://blogs.wsj.com/moneybeat/2013/12/16/bubble-in-u-s-stocks-think-again/
REGARDING THE TAPER
Wednesday at 2PM the Fed will release the results of the ongoing FOMC
meeting. If this were the old Fed
everyone would be sure of a Taper because that’s what President of the Federal
Reserve Bank of St Louis, James Bullard, signaled last week. But this isn’t the Greenspan Fed and the FOMC
has said they are looking at more than one metric.
The last FOMC statement included: “In judging when to moderate the pace
of asset purchases, the Committee will, at its coming meetings, assess whether
incoming information continues to support the Committee's expectation of
ongoing improvement in labor market conditions and inflation
moving back toward its longer-run objective.”
Inflation is well below the Fed’s 2% goal (see below CPI paragraph) and
there is some concern over deflation (falling prices). Today’s guess (I change my mind every day) is
NO TAPER in December.
As I have noted in prior blogs, impacts of tapering is not
likely to be felt at the first reduction of QE anyway, so all of the hype over
taper is not warranted.
Here’s today’s take on inflation…there isn’t any…
CPI – CONSUMER PRICE INDEX (Briefing.com)
“Consumer price growth was flat in November after falling 0.1% in
October. The Briefing.com consensus expected CPI to increase 0.1%. Excluding food and energy, core CPI increased
0.2% in November and ended a streak of three consecutive months of 0.1% growth.
The consensus expected these prices to increase 0.1%....Weak inflationary
pressures will continue until economic/income growth accelerates. CPI trends do
not call for tighter monetary policy any time soon.” Story at…http://www.briefing.com/Investor/Calendars/Economic/Releases/cpi.htm
WHAT INFLATION MEANS TO YOU: INSIDE THE CONSUMER PRICE INDEX
(dShort.com)
This is a good breakdown and discussion of the CPI and there
is no point in me trying to summarize it.
The one thing that struck me: College tuition is up 130% in 14-yrs. This is truly outrageous! This wouldn’t be the case if college were a
free-market enterprise, i.e., if there was no Government money involved,
colleges would be forced to cut costs.
Story at…http://advisorperspectives.com/dshort/updates/CPI-Category-Overview.php
5-10-20 TIMER
As I have discussed in the article about the NTSM system on NTSM
performance “Limitations” linked here…http://navigatethestockmarket.blogspot.com/p/back-testing-navigate-stock-market.html
…its weakness occurs during market periods exhibiting lack of volatility and a steady upward trend. Ouch. That’s what the S&P 500 has done this year and I have significantly underperformed as a result. To correct this issue, I’ve added a good trend following indicator to provide a buy signal if my NTSM system misses the boat (as it has this year). The “5-10-20 Timer” is a simple but effective timing system that NTSM will use as a BUY signal to augment NTSM signals. The 5-10-20 Timer rules are simple: BUY when the 5-day moving average (5-dMA) and the 10-dMA are both above the 20-dMA and SELL when the 5-dMA and the 10-dMA are both below the 20-dMA.
Currently, the 5-10-20 Timer is signaling HOLD.
MARKET REPORT
Monday, the S&P 500 was down 0.3% to 1781 (rounded).
VIX was up 1% to
16.21. Monday, the S&P 500 was down 0.3% to 1781 (rounded).
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 47%
at the close Tuesday. (A number below 50%
for the 10-day average is generally bad news for the market.) The chart of the 10-dMA of breadth still shows lower
highs and lower lows as market breadth continued to deteriorate today within
its trend lines.
New-lows outpaced new-highs Tuesday, leaving the spread
(new-hi minus new-low) at mnus-2 (it was +37 Monday). The 10-day moving average of change in the spread was +3.
In other words, over the last 10-days, on average, the spread has increased by 3
each day.
Market internals improved overall, but remain neutral on
the market. No smoking gun yet.
I need a bigger pullback to get back in. Otherwise I will continue to sit out the
party.
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 now under-performing my own system by about 6%!) 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 has looked too frothy to rush back in…we’ll see if the market will
pullback so I can join the insanity. If
not, cash is (grit my teeth and put on a false smile) fine.
