CHINA JANUARY MANUFACTURING PMI CONTRACTS (Reuters)
Activity in China's factory sector contracted in January
for the first time in six months as new orders declined, a preliminary private
survey showed on Thursday, confirming that a mild slowdown at the end of 2013
has continued into the new year…While the economy narrowly missed expectations
for full-year growth to fall to a 14-year low in 2013, some economists say a
further cooldown will be inevitable this year as officials hunker down for
difficult reforms.” Full story at…
CHINA MATTERS
I noted Tuesday that futures reacted immediately to the
China GDP numbers. Wednesday night,
S&P 500 futures fell 7-points in a matter of minutes after the China PMI
data was available. It seems apparent
that the US market is now quite sensitive to China news. China has been having liquidity problems with
their banking system. This added worry can’t be good for the markets – it just
will depend on where the story goes from here.
CRUNCH ESCALATES (Bloomberg)
“A doubling in China’s money-market funds in the past six
months is draining bank deposits and raising the risk of financial failures
during cash crunches, according to Fitch Ratings.” Full story at...
JOBLESS CLAIMS
(USA TODAY/ AP)
“The number of
Americans seeking unemployment benefits ticked up 1,000 last week to a
seasonally adjusted 326,000, a level consistent with steady job gains. The
Labor Department says the four-week average, a less volatile measure, fell for
the third straight week to 331,500. Both figures are close to pre-recession
levels and suggest that companies are laying off few workers..."An array
of surveys tell us labor demand is rising, and we remain of the view that the
underlying trend in payroll growth is slowly picking up," said Ian
Shepherdson, an economist at Pantheon Macroeconomics.” Full story at...
EARNINGS (Reuters)
“With 16 percent of the S&P 500 having reported,
about 61 percent have topped profit expectations, according to Thomson Reuters
data, compared with the average of 67 percent over the past four quarters. More
than 66 percent have topped revenue expectations, above the 55 percent average
over that timeframe….About eight companies have issued negative outlooks for
every positive one, which would mark the lowest ratio on record should it
continue.” Story at…
MARKET REPORT
Thursday, the S&P 500 was down 0.9% to 1828 (rounded).
VIX was UP about 7% to 13.77.
The 10-year Treasury Note yield closed lower to 2.78% as
investors sold stocks and bought bonds. (As bond prices rise, yield falls.) Rates
at 3% or above are considered by some traders to be “trouble-for-stocks”.
Today (Thursday) was a statistically significant day in
price/volume action based on statistical analysis of price/volume
movement. These days are followed by a
reversal about 60% of the time so an up-day is favored for tomorrow, but with a
caveat. The market may be rolling over
now so the 60%-rule may not hold true this time. As I noted earlier, choppy up-down movement
in price of the S&P Index is typical at a top so we should watch to see if
this up/down movement continues. Since
we had a very strong 2013, investors may take profits rather than hanging on if
the markets pullback a little. If they
do, it might trigger margin calls and a cascading down move. That’s all conjecture, but I am on record as
expecting a correction in the first quarter of 2014 – correction (10%-15%
pullback) not crash.
MARKET INTERNALS (NYSE DATA)
Market Internals are deteriorating.
The 10-day moving average of stocks advancing fell slightly
to 55% at the close Thursday. (A number above
50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Thursday, leaving
the spread (new-hi minus new-low) at +46 (It was +150 Wednesday so this
represents a big slow down). The 10-day moving average of change in the spread fell
to -10. In other words, over the last 10-days, on average, the spread has decreased
by 10 each day.
Internals are still neutral, but only because the 10-dMA
of Breadth is still above 50% (otherwise internals would be negative). Breadth
(as I measure it) can be the slowest indicator.
New-high/new-low data has turned down sharply and it frequently calls short-term
market direction correctly.
Market Internals are a decent trend-following analysis of
current market action, but in 2013, if I had been buying the positive ratings
and selling negative ratings I would have under-performed a buy-and-hold
strategy.
NTSM
The four areas of analysis, Sentiment, Price, Volume and
VIX are currently rated as follows:
Sentiment remains screaming high and rose to 80%-bulls Wednesday
(5-dMA of selected Rydex/Guggenheim funds). The high value is a negative; Price
switched to neutral today; VIX and Volume remain neutral.
The most recent BUY signal for the NTSM system was 25
October. The “5-10-20 Timer” switched to
BUY from HOLD on 18 December.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. Unless I get a SELL signal
in the NTSM system, I will continue to income-average (a little each month)
into the stocks to get my %-invested up to around 50% (max for me now) unless
there is a correction that would allow me to move in sooner and at a higher
percentage. Since that is my expectation, I have not upped my invested
percentage in one move as I normally would.
