IS THE SECULAR BEAR OVER? NO. (Lance Roberts)
I have written on many occasions about the current Bear
market (2000-?) vs. the 1966-1982 Bear Market (measured by the Dow
Industrials). Here’s a good article by
Lance Roberts, posted to Doug Short’s Advisor Perspectives website, that
addressed this same subject in detail.
Lance concluded: “While stock prices can certainly be driven much higher
through the Federal Reserve's ongoing interventions, the inability for the
economic variables to "replay
the tape" of the 80's and 90's increases the potential of a
rather nasty mean reversion at some point in the future. It is precisely that
reversion that will likely create the "set
up" necessary to start the next great secular bull market.
However, as was seen at the bottom of the market in 1974, there were few
individual investors left to enjoy the beginning of that ride.” Commentary,
charts and analysis at http://advisorperspectives.com/dshort/guest/Lance-Roberts-140120-Past-Is-Prologue.php
CHINA ENERGY USE (Reuters)
“China's overall energy consumption rose 3.9 percent [in
2013] from the previous year to 3.76 billion tonnes of standard coal equivalent, the state-owned Economic
Information Daily said, citing unnamed official sources…Total energy
consumption this year is expected to grow 3.5 percent this year to 3.89 billion
tonnes of standard coal equivalent, according to the paper.” Full story at http://uk.reuters.com/article/2014/01/14/china-energy-idUKL3N0KO1FA20140114
CHINA IMPACTING US STOCK MARKET
I thought China’s energy use was interesting
because Sunday night S&P 500 futures fell prior to the China release of
GDP. Then the news came out that GDP
growth was 7.7% and that beat expectations and futures recovered. This indicates that traders are concerned
about China. Regarding the Chinese economy,
I am not an economist, but energy usage should track GDP. If energy use is growing at 3.9%, can GDP
grow at twice that rate? One possibility is that the numbers are made up. Another, legitimate reason is that the
Government is running large deficits since Government spending is part of
GDP. Regardless, the following is an
expert opinion on China’s expected growth for 2014…
CHINA GROWTH STAGNATING (CNN/Money)
“While last year's growth topped
the government's official target of 7.5%, China's economy is stagnating after
recording revised 7.7% GDP growth in 2012 and 9.3% in 2011. Looking ahead for
2014, expansion is forecast to slow to 7.4%. .."The data reinforce our
view that growth is on a downtrend and we continue to expect GDP growth to slow
[in 2014]," Nomura economists wrote in a research note.” Story at…
4 REASONS TO SHORT NOW (Yahoo Finance)
“Sentiment is too bullish…
Insiders are selling aggressively…
Margin debt is at an all-time high…
Credit spreads are at 30-year lows…
…"I think this is one of the better short opportunities that you've had since 2000 and then 2007," he says. "This is the time where the wind has taken all of the poor names up and when they come down, it's going to be nasty.” - Brad Lamensdorf, Co-manager of Ranger Equity Bear ETF (HDGE). Full story and video at…
http://finance.yahoo.com/blogs/talking-numbers/here-are-four-reasons-to-be-short-the-market--portfolio-manager-145506643.html
Perhaps, but most of the four reasons above were true for much of 2013 and his ETF lost 26% that year.
A REASON NOT TO SHORT NOW
My feeling is simply you can’t short now because the market internals
are all quite positive and that suggests more gains. That will change if the S&P 500 can’t get
above the old high of 1848. It has tried
once only to fall back.
MARKET REPORT
Tuesday, the S&P 500 was up 0.3% to 1844 (rounded).
VIX was up about 3% to 12.84.
The 10-year Treasury Note closed lower at 2.83% yield.
Rates at 3% or above are considered by some traders to be “trouble-for-stocks”.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 57% at the close Tuesday. (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Tuesday, leaving the spread (new-hi minus new-low) at +195 (it was +156 Friday). The 10-day moving average of change in the spread increased to +9. In other words, over the last 10-days, on average, the spread has increased by 9 each day.
The 10-day moving average of stocks advancing rose to 57% at the close Tuesday. (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Tuesday, leaving the spread (new-hi minus new-low) at +195 (it was +156 Friday). The 10-day moving average of change in the spread increased to +9. In other words, over the last 10-days, on average, the spread has increased by 9 each day.
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 haven’t changed and are currently rated as follows:
Sentiment remains screaming high, however, it fell to 79%
Friday %-bulls (5-dMA of selected Rydex/Guggenheim funds). The high value is a
negative; Price is positive since up-days have been larger than down-days over
the past month; 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.
