“A clean look at initial jobless claims points to improvement. Initial claims for the February 1 week fell a sharp 20,000 to a lower-than-expected 331,000. The 4-week average, at 334,000, is trending 15,000 below the month-ago comparison…Continuing claims, however, are not showing improvement. Continuing claims for the January 25 week rose 15,000…” Story at…http://bloomberg.econoday.com/byshoweventfull.asp?fid=460697&cust=bloomberg-us&year=2014&lid=0&prev=/byweek.asp
PERSPECTIVE ON THE CORRECTION (Lance Roberts at dSort.com)
“The current correction is certainly worth paying
attention because of the triggering of the "sell"
signal in our intermediate timing models. This doesn't mean that the next great
"financial crisis" is
upon us, but it does suggest higher levels of risk currently. While no one
knows for sure what the future will bring, portfolio management is about the
study of the probabilities of various outcomes both in the short term (technical analysis) and long term (fundamentals). It is from this
analysis that we can make calculated choices. However, for most individuals who
act upon headlines, and potentially biased commentators, "acting without knowing"
generally leads to poor outcomes...For many individuals, the best advice is to turn off the
television, use the internet to view pictures of cats
and leave the portfolio management process to someone who can remove the emotional
bias from your money.” – Lance Roberts.
Commentary and charts posted at Advisor Perspectives at...
CRASH PREDICTION – FREDDY KRUGER WAS NICE COMPAERED TO WHAT’S COMING
(CNBC)
The recent emerging market sell-off was the final tweet
of the canary in the coal mine, according to Albert Edwards, Societe Generale's
uber-bearish strategist, who now predicts a global recession with equity
valuations dropping to their lowest levels in a generation. "The ongoing EM (emerging market) debacle will be
less contained than sub-prime ultimately proved to be," he said in a
research note released on Thursday, warning that the markets face being trapped
in "a Freddie Kruger-like nightmare. The market has at last awoken from the dream it
hoped would last forever." Story at... http://www.cnbc.com/id/101395618
MARKET REPORT
Thursday, the S&P 500 was up 1.2% to 1773 (rounded). VIX was down about 14% to 17.23.
The 10-year Treasury Note yield rose to 2.7%. Rates at 3% or above are considered by some traders to be “trouble-for-stocks”. Yield has gone up recently as investor fears have subsided somewhat.
VIX is falling rapidly; the options players may think the correction is over. Market Internals are mostly negative for the 10-day averages I follow so one can’t conclude the correction is over yet. It is very difficult to identify short term trend changes when the pullback is very small. TRIN spiked at the low Monday suggesting a bottom, but neither new-low/new-highs nor breadth staged a big reversal and volume didn’t confirm a low, so take your pick on the indicators. Technically, it looks like the correction is still in play. The Jobs data may tip the scale and determine the short term market action.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 45%
at the close. (A number below 50% for
the 10-day average is generally bad news for the market.) In a reversal, new-highs outpaced new-lows
Thursday, leaving the spread (new-hi minus new-low) at +13. (It was minus 53 Wednesday). The 10-day moving
average of change in the spread was minus 3. In other words, over the last
10-days, on average, the spread has decreased by 3 each day.
Advancing volume has bucked the trend and is now
positive. Other internals remain
negative so I rate the internals as neutral on the market.
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.
Volume and VIX are currently negative. Price and Sentiment are neutral.
After 3-months of high sentiment, it has fallen (relative
to the extreme high %-bulls over the year) and has reached a neutral level at
73% bulls. That’s down 10% from the high
5-weeks ago. (Sentiment is based on a multiple of standard deviations above the
200-day average.)
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.
