…U.S. private employers added 175,000 jobs in January, the smallest gain since August…but the cold weather played a part in the slow growth. December's increase in jobs was revised down to 227,000 from the initially reported 238,000. The report is jointly developed with Moody's Analytics. The overall pace of job growth isn't far off ADP's recent trend, and hiring indexes in both the ISM survey and a separate service-sector survey from Markit kept investors optimistic that the U.S. Labor Department's nonfarm payrolls report on Friday will show January hiring rebounded after a weak December.” Story at…
http://www.reuters.com/article/2014/02/05/us-usa-economy-employment-idUSBREA140XW20140205?feedType=RSS&feedName=businessNews
NOT THE BIG ONE (Correction that is) (CNBC)
“Many are now calling for that much-needed correction
that may seem overdue — but why? Has the outlook changed that much? Or, are
prices just out of sync with current economic conditions? Based on the market
reaction to earnings, Federal Reserve tapering, the Asian
outlook and a recovering Europe, I'd say the latter. None of this information
is new at all but it seems like the reality of it all is settling in and
causing the market to do some sort of "do over…My sense is that the market
will churn as we continue to interpret the monthly global macro data and if the
data continues to show improvement, albeit slowly, then the markets will not
panic. Prices will come in line as investors make judgments on the future. The S&P 500 level that seems more reasonable
would be the 200-day daily moving average of of 1712, representing an 8-percent
pullback off the highs.” - Kenny Polcari is director of NYSE floor operations
at O'Neil Securities. Story at…http://www.cnbc.com/id/101389898
SELLOFF CREATED BEST DISCOUNTS IN YEARS: JPMORGAN’S TOM
LEE (CNBC)
“Longtime stock market bull Tom Lee has kept his
optimistic outlook intact after Monday's brutal selloff. In fact, he's telling
investors to prepare to buy the dips after the selloff, and some of the best
price-to-earnings discounts can be found in the companies most exposed to
emerging market currencies, said Lee, JPMorgan Chase's chief equity strategist,
on Tuesday during an interview with CNBC. They should also prepare for modest
losses if the selloff continues after Tuesday's slight rebound, Lee said,
adding that a deeper crisis doesn't appear imminent.” Story and Video at… http://www.cnbc.com/id/101388498
When Mr. Lee appeared on CNBC, the market was down 5%, so this is just a buy-the-dip recommendation from a pro. I am going to try and identify a bottom. Hopefully I’ll get close and come out ahead of the market this time.
MARC FABER PREDICTS CORRECTION BUT WANTS A BEAR MARKET (CNBC)
“Marc Faber predicts that stocks will drop by 20 percent
to 30 percent in the near future. But he personally hopes that they will fall
even further. ‘I think the market is way overdue for a 20 to 30 percent
correction," said Faber, the editor and publisher of the Gloom, Boom &
Doom Report. But that is "nothing that worries me," he said. "In
fact, I'm hoping for the market to drop 40 percent so stocks will again
become—from a value point of view—attractive... "If the rebound fails
around 1,820 [on the S&P 500] and then the market starts to
drift again on the downside, and we see important shares for the market such as
General Motors, GE, Coke ...
failing to make new highs, then I think we can assume that something more
serious is in the offing.’" Story and Video at…http://www.cnbc.com/id/101389404
FED PRESIDENTS SAY STOCK DECLINE UNLIKELY TO DERAIL QE TAPER (Bloomberg)
“Two Federal Reserve district bank presidents signaled a
decline in global stock markets probably won’t deter the Fed from further
trimming bond buying that has pushed up central bank assets to $4.1 trillion.”
Story at…http://www.bloomberg.com/news/2014-02-04/lacker-says-stock-declines-probably-won-t-derail-qe-tapering.html
MARKET REPORT
Wednesday, the S&P 500 was down 0.2% to 1752 (rounded).
VIX was up about 4% to 19.95.
The 10-year Treasury Note yield rose to 2.67%. Rates at
3% or above are considered by some traders to be “trouble-for-stocks”. Yield has gone up slightly the last 2-days as
investors bought stocks and demand for bonds fell. As bond-prices rise, yields fall.
Volumes have picked up about 10% in the month. That’s typical for a correction. I have not seen much of a bounce or much sign
of panic, but VIX is elevated so there is considerable concern in the trader
community.
Only 41% of stocks advanced today. That’s a fairly low number for only a 0.2%
loss, so perhaps tomorrow (Thursday) will follow thru with a down day. The market is now down 5%. The 200-dMA is now 1709 or about 2.5% below
today’s close. My guess is we could see an end at the 200-dMA, but…in the near term the S&P 500 will need to retest the
prior low of 1741. A successful test would be a surprise, but this correction could end like others in 2013 and bounce up from the 1741 level.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 41%
at the close. (A number below 50% for
the 10-day average is generally bad news for the market.) New-lows outpaced new-highs Wednesday, leaving
the spread (new-hi minus new-low) at minus 53. (It was minus 39 Tuesday). The 10-day moving
average of change in the spread remained minus 20. In other words, over the
last 10-days, on average, the spread has decreased by 20 each day. 
Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. In 2013, using these internals alone would have made a 16% return vs. 30% for the S&P 500 (in on Positive out on Negative – no shorting). Of course, few trend-following systems will do well in an extreme low-volatility, straight-up year.
NTSM
The NTSM system remained SELL today.
Sentiment, Volume and VIX are currently negative. Price is neutral.
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. 30% is a reasonable level of stock holdings for a correction, so I don’t need to reduce holdings since I don’t think this will be a major crash. Even if a surprise collapse did take the stock market down by 50%, I’d only lose 15% in the stock portfolio. On the other hand, if I am wrong, leaving 30% invested in stocks hedges the bet since no system is perfect.
