Chicago PMI Contracts i.e., Manufacturing Shrinking

CHICAGO PMI SLUMPS TO 3.5-YEAR LOW (MarketWatch)
“Chicago PMI slumped to 49.0 in April, down from 52.4 in March and at a reading indicating contraction. That’s the worst reading since September 2009.  Economists polled by MarketWatch had expected a 52.5 reading.”
Story at…
http://www.marketwatch.com/story/chicago-pmi-slumps-to-35-year-low-2013-04-30?link=MW_pulse

CONSUMER CONFIDENCE UP (Bloomberg)

“The Conference Board’s index rose to 68.1, exceeding the highest projection in a Bloomberg survey, from a revised 61.9 in March, data from the New York-based private research group showed today. Economists surveyed by Bloomberg forecast an increase to 61.  Gains in the stock market, an increase in property values and cheaper prices at the gas pump are helping stabilize household wealth…“The fact that they feel a little bit wealthier will give them a little more leeway,” said Brian Jones, senior U.S. economist in New York at Societe Gererale.”  Story at…
http://www.bloomberg.com/news/2013-04-30/consumer-confidence-in-u-s-rose-more-than-forecast-in-april.html

‘UTTERLY ABSURD’ STOCK RALLY: 3-PROS (CNBC)

Josh Brown of Fusion Analytics:
"It's only the third time in history that we've gone from January into May 1 without a 5 percent correction.," he said. "The other two times, you didn't get a great result afterward..."

Brian Kelly of Shelter Harbor Capital:

"History is on my side, and I'm still selling."

Dan Nathan of RiskReversal.com:

"This week, we saw names like Bristol-Myers, Amgen, Procter & Gamble, AT&T – these are all defensives with pretty decent yields that have been pretty crowded trades – they all got nailed," he said. "I think you have to keep your eyes open."
Full story at…
http://www.cnbc.com/id/100680357

MARGIN DEBT AT EXTREME LEVELS (Chris Kimble)

“Sometimes in history, investors feel so confident about the future of stocks that they actually use up all their available cash and then borrow money to invest in the market. Now is one of those times!  …only one other time in history has negative net worth been this low, which was the tech bubble back in 2000.” – Chris Kimble posted at dshort.com. 

Chris Kimble points out that there were two other times when negative net worth approached this level, but did not get as extreme.  Those were in 2007 (50% S&P 500 decline) and 2011 (17% S&P 500 decline).  Full post with charts at…

http://advisorperspectives.com/dshort/guest/Chris-Kimble-130430-Margin-Debt-Update.php

JOBS AND THE LABOR PARTICIPATION RATE

I have on several occasions written about the lack of jobs in the economy as represented by the number (or percentage) of Americans actually working.  The wall Street Journal had a good article on the subject.  WSJ noted that lack of jobs is clearly a problem and many have quit looking for work, but there are other factors that mitigate the problem.  See below:

REAL CULPRIT BEHIND SMALLER WORKFORCE: AGE (WSJ)

“Americans are leaving the labor force in unprecedented numbers. But the trend has more to do with retiring baby boomers than frustrated job seekers abandoning their searches.   The share of the population either working or looking for work in March hit its lowest level since 1979. The measure, known as the participation rate, now stands at 63.3%, down from 66% when the recession began. That represents close to seven million workers who are now "missing" from the labor force…the labor force is missing about three million workers who aren't in school or retired. That is still significant: Add those workers to the unemployment rolls and the jobless rate would jump to 9.3%. But it suggests the decline in participation is about more than a weak economy.”  Full story at…
http://online.wsj.com/article/SB10001424127887323798104578450651084576338.html

THE REINHART ROGOFF FLAP CONTINUES

If you haven’t heard, there has been a flap among economists over an error in a spreadsheet by Ken Rogoff and Carmen Reinhart where they argued that a debt of 90% of GDP would bring low-growth or recession.  This was in a paper by the economists, not in their book, “This Time is Different”.  The conclusion that 90% is a critical level for debt to GDP ratio is apparently not correct, but the general conclusion that too much debt leads to slower growth is valid.  Here’s an interview with Niall Ferguson.

“The headlines have done a disservice to Ken Rogoff and Carmen Reinhart,” Ferguson notes. “It’s extremely implausible that governments with already high debt can improve their situation by making their debt even larger. High debt scenarios end with inflation or default. They don’t end with a rapid increase in the growth rate. A minor error in the Rogoff and Reinhart paper does not refute the case that governments with excessively large public debt have to bring them under control.” - Niall Ferguson, Harvard University history professor and author of “Civilization: The West and the Rest”

He went on to suggest that the United States position is actually much riskier than Japan because Japan’s debt (200% debt to GDP ratio) is funded by its citizens while the US debt is funded by foreigners.   Video at…
http://finance.yahoo.com/blogs/daily-ticker/niall-ferguson-paul-krugman-still-wrong-government-spending-150100183.html?vp=1

MARKET RECAP
Tuesday, the S&P 500 was up 0.25% to 1,598 (rounded), another new high. VIX was down 1.4% to 13.52.

Today was a high volume day with volume about 20% higher than this month’s daily average.  Perhaps it was end of the month window dressing for the fund managers?

NTSM

Tuesday, the NTSM analysis was again at HOLD at the close.  All indicators are neutral, but Sentiment is rising quickly and may switch to sell soon.  It is not likely that the NTSM system will switch to sell since other indicators are solidly in neutral.      

Put this on permanent repeat…A statistically significant day (about a 1% climb in the S&P 500) will signal a top to me.  I am guessing the top will be when the S&P 500 climbs another couple of percent higher. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

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.

Earnings Up – Revenue Down

FALLING REVENUES – BAD NEWS FOR THE MARKETS (FACTSET)
While reported earnings this quarter have been in line with the prior four years average, revenues have been falling.  As FACTSET noted:
“…only 44% of S&P 500 companies have reported revenues above the mean estimate to date. This percentage is below the average of 57% over the past four years. As a result, the revenue growth rate has declined to -0.6% today from 0.4% at the end of March and 0.9% at the start of the quarter. If the final revenue growth rate for the quarter is -0.6%, it will mark the second time in the past three quarters that the S&P 500 will have reported an aggregate year-over-year decline in revenues.

It is interesting to note that the market does not seem to be reacting negatively to the unusually high percentage of companies reporting revenue below analyst expectations and the falling revenue growth rate for the quarter.” [My emphasis]

Full report from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.26.13

My cmt: No the markets aren’t reacting.  I think the lack of market reaction in the indices is unusual, as does FACTSET, but it can’t last forever.   

EUROPE (FACTSET)

For the quarter, Europe's results were dampened by ongoing economic uncertainty. First quarter comparable sales were down 1.1%...” –McDonald’s Corp. (Apr. 19)

“We planned for Europe to be similar to 2012, down again, but it was even weaker than we had expected.” –General Electric (Apr. 19)

Full report from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.26.13

CHINA (FACTSET)

“In Asia/Pacific, Middle East and Africa (APMEA), first quarter comparable sales declined 3.3% primarily due to ongoing weakness in Japan and negative results in China.” –McDonald’s Corp. (Apr. 19)
Full report from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.26.13

DR. COPPER (from a trader board)

“Dr. Copper has a better forecasting record than most prognosticators, and it thinks the outlook is terrible. A head and shoulders pattern, shown on the weekly chart, projects down to $1.70-2.00 from current level of $3.10 area. If it happens, everything else will be in crisis mode similar to 2008.”

MARKET RECAP
Monday, the S&P 500 was up 0.7% to 1,594 (rounded). That's a new high for the S&P 500.

 

VIX was up 0.7% to  13.71.

The S&P 500 is 9% above its 200-dMA at today’s close.  I don’t expect it to get too much higher than 10% above that level.

Volume was down about 20% today compared to the month’s data.  You might say there was little conviction at today’s top; or you might say, since Japan and China exchanges were closed today, then Japan and China must account for 20% of the daily NYSE volume.  That might give a clue why the market has been going up in the face of declining economic data.  With currencies declining vs. the dollar, foreigners can hedge their currency decline by investing in the S&P 500.

NTSM

Monday, the NTSM analysis was again at HOLD at the close.  All indicators are now neutral. 

A statistically significant day (about a 1% climb in the S&P 500) will signal a top to me.  I am guessing the top will be when the S&P 500 climbs another couple of percent higher. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

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.

1st Quarter GDP

GDP – OOPS ECONOMIC GROWTH WASN’T SO GREAT AFTER ALL (CNBC)
“U.S. economic growth regained speed in the first quarter, but not as much as expected…Gross domestic product expanded at 2.5 percent annual rate, the Commerce Department said on Friday, after growth nearly stalled at 0.4 percent in the fourth quarter. ….Data ranging from employment to retail sales and manufacturing weakened substantially in March after robust gains in the first two months of the year. There are indications the weakness persisted into April.”  Full story at…
http://www.cnbc.com/id/100678290

ATA TRUCK TONANGE INCREASED 0.9% IN MARCH

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index gained 0.9% in March after decreasing 0.7% in February….
…Fitting with the expectation for solid gross domestic product growth in the first quarter, tonnage was strong in March and the quarter overall,” ATA Chief Economist Bob Costello said. “At 3.9% year-over-year growth, the first quarter increase was the best since the final quarter 2011.

“Expect freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns,” he said. “The good news for tonnage is housing starts are growing and energy production is good – both of which generates heavy freight. However, these two sectors alone won’t be enough to keep the overall index growing at a 3.9% clip in the second quarter.”  Press release from ATA at …

http://www.truckline.com/pages/article.aspx?id=1104%2F8e1c7279-ed27-4c03-b189-ceeee26bbb12

RECESSION?

No evidence of recession in the ATA report!

My own analysis for recession is to look at the Morgan Stanley Cyclical Index (CYC) compared to the S&P 500.  Over the longer term, the CYC is not keeping up with the S&P 500 (on a percentage basis), but the CYC isn’t falling much either so there is concern, but no recession predicted by investors.

15-YR MORTGAGES AT NEW LOW (CNN/Money)

“Mortgage rates continued to drop, with the 15-year fixed-rate loan hitting a record low, according to a weekly report from mortgage financier Freddie Mac.
The 15-year fixed rate fell to 2.61% this week from 2.64%. The previous record low of 2.63% was set the week of Nov. 21, 2012.”   Full story at…
http://money.cnn.com/2013/04/25/real_estate/mortgage-rate-record/index.html?iid=Lead

Mortgage rates are driven down by investors buying bonds, usually in a desire for safety due to fear of the equity market.  The bond market is suggesting that the stock market may not be as healthy as it looks.

MARKET RECAP
Friday, the S&P 500 was down 0.2% to 1,582 (rounded). VIX was almost unchanged, down 0.1% to 13.61.

NTSM

Friday, the NTSM analysis was again HOLD at the close.  All indicators are now neutral.  

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

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.

 

Jobs Better than Expected

JOBLESS CLAIMS FELL BY 16,000 TO 339,000
“The number of Americans filing new claims for unemployment benefits fell last week, offering reassurance that the bottom is not falling out of the labor market despite signs of slower growth…Economic data for January and February suggested that growth accelerated in the first quarter after activity almost stalled in the final three months of 2012.  But…the economy appeared to have hit a speed bump at the end of the quarter, with data ranging from employment to retail sales and manufacturing weakening significantly in March.” – CNBC Story at…
http://www.cnbc.com/id/100672188

SPAIN – NEW RECORD FOR UNEMPLOYMENT (ZeroHedge)

“Spain has just breached the 27% unemployment level - the highest since at least 1976, when data began following Dictator Francisco Franco's death.”
http://www.zerohedge.com/news/2013-04-25/spanish-unemployment-tops-record-rising-fastest-rate-year

RBS – CENTRAL BANKS INVEST IN RISKY ASSETS (Rick Santelli, CNBC)

Rick Santelli (CNBC) reported on a Survey of 60 central-banks, controlling close to 7-trillion dollars, published by the Royal Bank of Scotland called, “”Trends in Reserve Management.”  While the central banks normally invest in very conservative holdings, RBS concluded:
“The policies of the Federal Reserve and the ECB are having a major impact on reserve management policies.  Reserve managers have looked to diversify their portfolios in a variety of ways: from movements along the yield curve to investing in new markets and new currencies.  Central banks are investing in markets & currencies that were until recently not even likely to be considered.”

Rick said that the banks were big into currencies and equities and he had a big problem with that:  “There is a danger that everyone is loaded in the same direction. Should the central banks, like the federal reserve, not be able to prime that well into a self-sustaining activity when some of the quantitative programs end, who gets caught holding the bag?”  Video at…

http://video.cnbc.com/gallery/?play=1&video=3000164122

The Federal reserve and the ECB are prevented from investing in equities.  Not so many other Central Banks…Perhaps this rally will never end.

GREECE TO GERMANY: PAY WAR REPARATIONS (Wall St Journal – online)

“Greece is seeking to revive a long-standing demand for reparations from Germany arising from World War II, its foreign minister said on Wednesday, in a move that could test Athens's ties with Berlin, which bears the largest part of the country's rescue package.  Greece's claims to war damages from Germany's occupation of the country some 70 years ago aren't new and there is little sign that they could be successful this time.”  Story at…
http://online.wsj.com/article/SB10001424127887324474004578443081332166430.html

BUYING JAPAN

For those who may be buying the Japanese stock market, remember: pair this trade with a short of the Yen either thru the currency markets or an ETF.  The Japanese Central Bank is hell bent on devaluing the Yen so an investment in Japan (in US dollars) faces significant currency risk.

MARKET RECAP
Thursday, the S&P 500 was up 0.4% to 1,585 (rounded). VIX was almost unchanged, up 0.1% to 13.62.

NTSM

Thursday, the NTSM analysis was HOLD at the close.  All indicators are now neutral.  

It still looks like a top is forming.  It simply isn’t going to be the expected quick pullback.  That was predicted by too many people.  So far, the S&P 500 has just bounced on its lower trend-line so the bull market is officially still intact.  The bull will be tested when the markets retest the highs.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

Earnings Decline

Chart from ZeroHedge at
http://www.zerohedge.com/news/2013-04-24/another-wtf-chart

APPLE

Q2 margin was weaker than expected at 37.5% versus an expected 38.5%.  The particularly troubling news was the future guidance: Q3 revenue was guided by the company at $33.5-$35.5 billion and this was far below the estimated consensus value of $38.4.  ZeroHedge has a detailed analysis of Apple earnings at… 
http://www.zerohedge.com/news/2013-04-23/aapl-beats-revenues-and-eps-guides-lower-boosts-dividend

Apple was up big for the day (Tuesday), but gave it all back after the earnings announcement and was down in after- hours trading as it fell to 399.  Apple’s forward P/E is now 8 according to Yahoo finance.  If I wasn’t negative on the overall market, I’d take a hard look at Apple.  Who ever thought Apple would be a value play?

THE ASSOCIATED PRESS FAKE TWEET (The Tweet Crash)

Yesterday (Tuesday), the market fell 1% in seconds after a fake tweet from the AP reported that there had been explosions at the White House.  The news was quickly found to be false and the markets quickly recovered.  If you looked at yesterday’s chart, you would have assumed it was some sort of mistake in the computers.  It was related to computers – high frequency trading by computers.  Here’s Rick Santelli’s take from CNBC.

“You've got to be kidding me where a fake tweet can have that a kind of impact over the markets at all. Yeah, it highlights how we're in many ways some of our markets are just, you know, high-speed casinos…is it any surprise that [the] average guy on main street looks at this and goes none of this for me, you people are all crazy.”  CNBC Video at…

http://video.cnbc.com/gallery/?video=3000163788&play=1

Here’s more from Rick:

"...at the point yesterday around 1:00 eastern you looked at stocks, of course, you saw boom you had one of these [pointing to a chart with a huge quick drop]. If you look at the euro currency against the dollar you didn't see it.  If you look at the British pound, the symbol on the computers, you didn't see it. If you looked at the Aussie dollar you didn't see it.  Where you did see the same pattern is any of the cross trades. whether the euro yen, the pound yen, anything yen, you had the exact same pattern.”

“Computerized trading takes place like boom. You already missed half of it just in the snap of a finger. So obviously there was no thought going into this. It's programmed in.”

RICK SANTELLI’S CONCLUSION

“The yen is now programmed into the equity algorithms on the high speed computers and that is very important. We talked about the first step was to borrow yen at low interest rates. What is the long and short of borrowing yen? A short position. So if you really want to know what's going on in the world of stimulus, keep an eye on anything related to the yen.”  CNBC Video at…
http://video.cnbc.com/gallery/?video=3000163839&play=1

MARKET RECAP
Wednesday, the S&P 500 was unchanged and finished at 1579 (rounded). VIX rose about 1% to 13.61.

Market internals are basically flat and thus aren’t giving many clues about market direction.  10-dMA of the percentage of stocks advancing, though, continues a long down-trend that started back in November so unless that trend changes, this market will revert back to correction mode at some point fairly soon.  It may take another week or two.  We’ll see.  Calling short term movement is mostly impossible, so “we’ll see” is about the best I can do.

NTSM

Wednesday, the NTSM analysis was HOLD at the close.  Only the SENTIMENT indicator is negative. VOLUME, VIX and PRICE are all neutral.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
…but now I have confirmation from the NTSM analysis which 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.

Don’t Be Hugely Long This Market

“If you are hugely long this market…valuations say you shouldn’t be; margin debt says you shouldn’t be; history says you shouldn’t be...Don’t just do something; sit there!” – Mish Shedlock, 2013 Speaker Presentations, Wine Country Conference benefitting the Les Turner ALS Foundation.  Presentations at…
http://www.winecountryconference.com/2013-speaker-presentations/

China PMI Falls (CNBC)

“China's first economic indicator for the second quarter far underperformed expectations on Tuesday, putting the nation's recovery in question as economists recalibrate growth projections lower for the world's second largest economy.
China's flash HSBC PMI fell to a two-month low of 50.5 in April from 51.6 in March…"It's a big miss. Confidence in the outlook for China has really diminished, particularly after first quarter growth data," said Tim Condon, head of research for Asia at ING. "People are now reforming their views on economy. The new view is that growth will be stagnant," he added.”  Full story at…
http://www.cnbc.com/id/100662646

Q1 2013 EARNINGS REPORT (FACTSET)

"With about 20% of the companies in the S&P 500 reporting actual results, the number of companies reporting earnings above estimates is slightly above recent averages, while the percentage of companies reporting revenues above estimates is below recent averages….The blended revenue growth rate for Q1 2013 is -0.2%, down from an estimate of 0.4% at the end of the quarter (March 31)."  Web page at…

http://www.factset.com/

RISKY EARNINGS EXPECTATIONS (CNBC)

"The main risk in the U.S. earnings season is actually about overly optimistic earnings expectations in the second half of this year, so you just have to focus a little further out," she said. "And the reason behind that is that the numbers are still forecasting 10 percent growth in earnings over last year, in the same period as last year, and in the face of weakening economic data, this could give markets a reason to be a little bit shaky going forward." - Gemma Godfrey of Brooks Macdonald Asset Management
http://www.cnbc.com/id/100661429
 
MARKET RECAP
Tuesday, the S&P 500 was up 1% to 1579   (rounded). VIX fell about 6% to 13.50.

NTSM

Tuesday, the NTSM analysis was HOLD at the close.  Only PRICE and SENTIMENT indicators are negative. VOLUME is neutral and VIX has switched to positive based on the sharp drop in VIX recently.

Now the market has climbed slightly ahead of the point where the NTSM system gave a sell signal – 1575.  (I “panicked” out at 1540, about 2% lower.)  I am not worried about a few percent under-performance.  The prior top is 1593.  Perhaps the S&P 500 will get there or even break to the even number (1600).  Many issues remain though.  I think many investors will decide to “sell in May and go away.”

The S&P 500 is 8.5% above its 200-day moving average.  10% is about as high as I think it can go and the market hit that number a week and a half ago.  Maybe it will go higher – maybe not.  (Hey, I’m just hedging my bets!)

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
…but now I have confirmation from the NTSM analysis which 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.

The Top is In – The Cover-Story Rule

DOW 16,000 (Barrons)
Barrons said in its “…latest survey, 74% of money managers identify themselves as bullish or very bullish about the prospects for US stocks – an all-time high…going back more than 20-years.”  About a third of those managers expect the Dow to reach 16,000 by the middle of next year, or about 10% higher than today’s value.

Barron’s made this their cover story and front-page news.  I took note because cover stories in major magazines are often at market turning points. 

John Hussman picked up on the same theme, but he had an interesting take on the subject.  Rather than repeat his comments, I’ll just repeat the graphic from Hussman Funds.  As the chart shows, cover stories like this often happen at, or near, the top.

Chart from Hussman Funds @

http://www.hussmanfunds.com/wmc/wmc130422.htm

 

IBM – IT’S IMPORTANT (Barrons)

Barrons pointed out (quoting Bespoke Investment Group) that “…IBM’s earnings report has accurately predicted the market’s direction over the ensuing 5-weeks more than 75% of the time.”  IBM fell 10% over the last 2-days after it missed its revenue and earnings targets Friday.

MARKET RECAP
Monday, the S&P 500 was up 0.5% to 1563 (rounded). VIX fell about 4% to 14.39.

NTSM

Monday, the NTSM analysis was HOLD at the close.  Only PRICE and SENTIMENT indicators are negative. VOLUME and VIX are neutral. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

…but now I have confirmation from the NTSM analysis which 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.

 

Stock Market Crash Prediction (Another One)

We’ve heard from Charles Nenner before.  Here’s the latest.

CRASH PREDICTION – CHARLES NENNER (Yahoo Finance)

“…Charles Nenner, founder of the Charles Nenner Research Center…thinks the sell-off has only just begun…Expectations that the macro picture will improve were a bullish catalyst in 2009. Now it's time to sell the news…Nenner says his firm took off all of its equity exposure when the S&P was at 1,510 specifically so they "wouldn't have to deal with all this mess…Any market close more than a couple points below 1,544 on the S&P 500 would be an indication to him the market is ready to roll over in a big way…"  Full story and video at…
http://finance.yahoo.com/blogs/breakout/stocks-set-scary-may-says-nenner-151635217.html

IBM REPORTS WEAK REVENUES (CNBC)

"IBM's poor earnings performance in the first quarter likely foretells a rough time ahead for the stock market.  In an after-the-bell report Thursday, the information technology leader missed narrowly on bottom-line profit but widely on top-line revenue…As a result, traders punished IBM in early Friday action, sending shares down 6 percent, corresponding almost perfectly with the revenue disappointment.”  Full story at…
http://www.cnbc.com/id/100655987
...And Apple is below 400. It wasn't all that long ago that Apple was trading at 700.

LOW INTEREST RATES HURT THE ECONOMY (YahooFinance)

"The Fed’s monetary policies have made it more difficult for banks to generate revenue, forcing them to seek profits in other ways...“It’s very difficult to make a loan of a multi-year duration because you have this very low interest rate on your balance sheet,” Bair explains. “That’s not good for business lending. Banks can make money in other ways – trading profits, investment banking fees, deposit accounts –other ways…that don’t necessarily help the economy.”

"Business lending, not home refinancing, holds the key to the economic recovery...“Our economic policies are too much aligned with trying to revitalize the economy we had pre-2007...” – Sheila Bair

Story at...
http://finance.yahoo.com/blogs/daily-ticker/low-interest-rates-hurting-not-helping-economy-sheila-122600957.html

MARKET RECAP
Friday, the S&P 500 was up 0.9% to 1555 (rounded). VIX fell about 15% to 14.97.

The S&P 500 made a lower-low yesterday (Thursday), with about 8% lower volume than the prior low on the day before.  Breadth improved with about twice as many stocks advancing.  New-high/new-low spread improved too.  This isn’t an all-clear for the correction, but it probably does mean that the market will reverse up.  I should have checked this yesterday – it always looks better to predict the future rather than predict the past.   Today was up on pretty good volume and I expect the market to go up until we again flush out the shorts.  That will probably be signaled by a big move up…say greater than 1% up.   As a wild guess – and that’s all it is – perhaps the S&P 500 will get up to 1580 before it reverses.  Who knows?  It could go back and test the top again at 1593. 

NTSM

Friday, the NTSM analysis was HOLD at the close.  Only PRICE and SENTIMENT indicators are negative. VOLUME and VIX are neutral. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
…but now I have confirmation from the NTSM analysis which 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.

 

Philly FED Down; Unemployment Applications Weak

PHILLY FED MANUFACTURING – SURPRISES TO THE DOWN SIDE (Business Insider)
“The indicator for overall activity remained slightly positive this month, but other broad indicators were mixed. Indicators for new orders and employment were weaker this month. The survey's broad indicators of future activity suggest that firms expect continued growth, but optimism waned compared with last month.”
Story at: http://www.businessinsider.com/philadelphia-fed-manufacturing-april-2013-4#ixzz2QpIc7ieX

US UNEMPLOYMENT APPLICATIONS RISE (Denver Post)

“The number of Americans seeking unemployment benefits increased just 4,000 last week to a seasonally adjusted 352,000. The slight gain kept applications at a level consistent with solid hiring and suggests March's sluggish hiring may be temporary...."It appears that the modest growth of the economy is continuing to support modest improvement in labor market conditions," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.”
Full story at... http://www.denverpost.com/breakingnews/ci_23051922/us-unemployment-aid-applications-rise-352k#ixzz2QpKkcXO5
That’s a curious spin; a slight rise is good news?

MARKET RECAP
Thursday, the S&P 500 was down 0.7% to 1542   (rounded). VIX rose 5% to 17.36.

NTSM

Thursday, the NTSM analysis was HOLD at the close, because the VIX indicator switched to neutral.

As expected, last night’s data brought the SENTIMENT indicator up to 63%-bulls and that officially made Sentiment a sell yesterday (Wednesday) to go along with the PRICE and VIX that were already sell.  This just reinforces the SELL call and makes it more likely that NTSM is right.

In the past, signals that weren’t “right” are not necessarily “wrong”.  Say what?? What I mean is that even when NTSM calls a sell and we don’t have a 10% or greater correction, I have generally gotten back in the market very close to the exit point so I haven’t lost money overall on “not-right” sell signals.  (George Orwell would be proud.)

YESTERDAY’S BUY SIGNAL FOR TRADERS????

NO, it wasn’t.  The S&P 500 closed down Thursday, so the action Wednesday was not considered a buying opportunity by traders.

MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
…but now I have confirmation from the NTSM analysis which 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.

Problems Around the World

EUROPE STOCKS DOWN
“Europe's 'Dow', the EuroStoxx 50, has suffered the biggest 4-day rout in 10 months as the broad Bloomberg 500 index plunged by the most in five months today amid terrible consumer, car registration, and economic collapse on the continent.”  Story at...
http://www.zerohedge.com/news/2013-04-17/european-stocks-plunge-most-six-months

FALLING YEN (CNBC)

“The falling yen coupled with a fall-off in Chinese investment inflows "increasingly resembles" the run-up to the 1997 currency crisis, said Albert Edwards, Societe Generale's ultra-bearish strategist..."It seems investors may have forgotten that yen weakness was one of the immediate causes of the 1997 Asian currency crisis and Asia's subsequent economic collapse," Edwards wrote in a global strategy note on Wednesday.”  Story at...
http://www.cnbc.com/id/100648846

HISTORY

In March of 2008, it was clear that a major crash was imminent: (1) the S&P 500 couldn’t get appreciably past its 2000 high; (2) Bear Sterns (the investment bank) failed; (3) the S&P 500 had fallen 18% from its prior high in what was thought to be a correction.  The market rallied 10% upward before continuing down to eventually lose more than half its value. 

So here we are again: (1) the S&P 500 couldn’t get appreciably past its 2007 high; (2) ??? ; (3) ??? 

…What is happening now (market disruption) is a world-wide event, involving precious metals, commodity prices, currencies and stock markets; it may well be more than just a run-of-the-mill correction, but it’s probably too early to say the market will undergo a major crash.  

MARKET RECAP
Wednesday, the S&P 500 was down 1.4% to 1552 (rounded). VIX rose 18% to 16.51.

Today (Wednesday) was another “statistically significant” day – this time it was down.  So repeating the mantra…that means the odds favor Thursday being an up-day.  We’ll see. 

NTSM

Tuesday, the NTSM analysis was HOLD at the close, but I might as well have called it a sell.  Sentiment was 62.6%-bulls.  My sell for the sentiment indicator is now 63%-bulls.

Today, Wednesday, the NTSM analysis is SELL at the close due to sell signals from the VIX and PRICE indicators.  I suspect Sentiment will switch to sell today too.

BUY SIGNAL FOR TRADERS????

Wednesday, the S&P 500 hit the 1552 level for the seventh time in the last month.  Wednesday’s visit to 1552 was on lower volume with slightly improved breadth compared to the prior visit. (Stop me if you’ve heard this before.)  Like the last time (8 April 2013), the volume actually was 89% of the previous low (2-days before) and breadth improved slightly. 

Many would consider those technicals to be signaling, “correction-over, time-to-buy” even though, in my opinion, the volume isn’t low-enough, nor have internals improved enough.

Still, for traders, this may signal another move up.  I am much less certain this time around because there is a negative, head-and-shoulders, chart-pattern looming that has a lot of traders worried.

Bottom line: The traders buy-signal makes no difference to my long-term positions and I don’t want to move any long-term money back into stocks since the NTSM analysis is currently SELL.  I’d need a lot more evidence before I get back in the stock market.  (If the market goes down tomorrow, we can forget about this discussion; a down-day will mean traders didn't consider today's market action a buying-opportunity.)                                           

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
…but now I have confirmation from the NTSM analysis.

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.