Monday, March 17, 2014

Industrial Production….Insider Selling…Drink a Black and Tan today…

“Industrial production increased 0.6% in February after declining an upwardly revised 0.2% (from -0.3%) in January. The consensus expected industrial production to increase 0.1% According to the industrial production data, manufacturing production increased 0.8% in February and completely wiped away the January decline…The report suggests that the turnaround was a result of a one-time, weather-related shock in January. We still believe, however, the downturn in January was the result of cyclical trends.” Story at…

“Corporate insiders are more bearish than they have been in almost 25 years. That isn’t good news for the stock market, since these insiders — corporate officers and directors— know more about their companies’ prospects than the rest of us. In fact, you may want to take their pessimism as a signal to ditch some of your stocks or shift into industries in which insiders aren’t heavily selling, such as energy, financials and basic industrials.” - Mark Hulbert.  Commentary at…
To no one’s surprise, the Crimean region of the Ukraine voted to join Russia.  The unknown now is, “What will be the response from the west?”  Any meaningful sanctions are likely to cripple the world’s economy, so this will be a test.  Miniscule “do-little-or-nothing” sanctions will be such a sign of weakness (after all of the bluster from NATO countries) that Russia will be emboldened to proceed with further annexation - Neville Chamberlain anyone?
S&P Futures fell after the Crimean voting results were published (around 6PM EDT Sunday night), but they recovered not long afterward. Guess what happened in Russia today? The Markets were up huge and the Ruble was up from its prior lows.  The sanctions proposed (freezing some assets and restricting travel for 11-Russians responsible for the incursion) will have no real effect and seem like a joke to me.  In the absence of real sanctions, happy days are here again.  For more on the “sanctions” see…

“Economic news out of China isn’t as cheerful as it used to be. Economic growth continues to slow down, though it still remains well above the world average. The two main engines of economic growth, exports and real estate, have cooled off. iShares China Large-Cap (NYSE:FXI) trade near five-year low. But there is a good sign, the country may be getting its business model right — expanding the role of markets, while limiting the role of government.”  Commentary at…
It is probably good news in the long run, but in the short run (here and now) the China slowdown is bad…potentially very bad.
“Janet Yellen takes center stage in the week ahead, chairing her first FOMC meeting amid market skittishness over events in Ukraine. There is little doubt the Fed will continue to move forward and announce another $10 billion "taper" of its bond-buying program, taking it to $55 billion a month…It's her first meeting. It just doesn't seem like the meeting where there's going to be a lot of policy fireworks given it might be prudent to let things coast through again, while they all get on the same page," said George Goncalves, Treasury strategist at Nomura Americas….While stocks sold off in the past week, buyers sought safety in bonds, sending the 10-year yield to 2.65 percent. The Dow was down 2.4 percent to 16,065 and the S&P was off nearly 2 percent to 1,841, in the worst weekly performance since January.”  Full video, story and commentary at…

Have I mentioned recently that I hate ALL Politicians?  Tesla has no dealerships; they sell direct, but there are now 3-states that prohibit direct-sales by car companies.  NJ is the latest.  So the Politicians of those states have voted to make sure their citizens pay more for a product in order to protect car dealers.  Mish Shedlock explains why those Politicians are “corrupt” at…

Monday, the S&P 500 was up about 1% to 1859 (rounded). 
VIX fell about 12% to 15.64.      
The yield on the 10-year Treasury Note rose slightly to 2.69% so there was some bond selling as investors put some funds back into stocks.

Today was a nice bounce, but it’s not clear that there is an “all-clear” signal at this point. Market internals improved, but final numbers were not available from so I could not do my final number crunching.  It is not wise to mix data sets, because different providers present different internals data on the markets.

Today was close to a statistically significant day and those days are usually followed by reversals about 60% of the time.  (A statistically significant day is simply a high day in volume and price action.  It is frequently in the range of a 1% move on the Index, but that value changes as volatility changes.  Today might have been significant, but I don’t have closing data yet.) It was clearly a statistically significant day in the morning, but the index fell some from its opening high.  I might be inclined to call Monday a relief rally (and forget the hint of reversal) but we had statistically significant days on 4 March at 1874 and again back at 1839 on 14 January.  These prior significant days were very near the highs and led to reversals so today’s price-volume action may be telling us that the index is near another high and doesn’t like these lofty levels.

I’ll change my tune if the Market Internals turn around, but the data isn't yet available.
Closing Market Internals were not available from  They looked neutral, but without crunching final numbers I won’t know. I’ll post later if they update the information.

The NTSM system switched to HOLD, Monday as VIX declined dramatically.

I reduced my stock allocation to 30% invested in stocks because of the NTSM sell signal on 13 March.  This is a conservative stock allocation commensurate with the NTSM Sell signal.  Leaving 30% invested hedges the bet in case NTSM is wrong – no system is perfect – and protects the portfolio from significant loss.  A 50% loss in stocks would produce only a 15% loss in the portfolio.  I expect this to be a short-term pullback, but that is mostly a guess based on the current news.