Wednesday, March 19, 2014

Stocks Down on the Fed Press Conference…Trucking Positive on the Economy

“Stocks were relatively stable as Yellen started her press conference wrapping up the Fed's Open Market Committee two-day policy meeting, but fell sharply after she said the Fed's stimulus program would most likely be finished by the fall and that a rate hike could come as soon as early 2015. …the Fed said it will continue trimming, or tapering, its monthly bond buying program by another $10 billion, to $55 billion a month…The Fed also said in its statement that was dropping its 6.5% unemployment threshold for hiking interest rates, instead saying that it will strive for maximum employment and 2% inflation before any rate change.”  Story at…

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 2.8% in February, after plunging 4.5% the previous month…Compared with February 2013, the SA index increased 3.6%. Year-to-date, compared with the same period last year, tonnage is up 2.3%...“It is pretty clear that winter weather had a negative impact on truck tonnage during February,” said ATA Chief Economist Bob Costello. “However, the impact wasn’t as bad as in January because of the backlog in freight due to the number of storms that hit over the January and February period.” Full press release at…
Trucking says the economy is OK.

“Porsche AG will swap out the engine on the racing version of the 911 sports car after the German automaker took the rare step of telling customers to stop driving the model because the vehicle could catch fire.”  Story at…
Chevy couldn’t replace a 15-cent starter spring for 10-years, but Porsche is swapping entire engines after 2-failures.  I guess that‘s what you get when you pay 200-grand for a car.  Unfortunately, this story doesn’t apply to me.

Wednesday, the S&P 500 was flat until the end of the Fed meeting when it fell sharply and finished down 0.6% to 1861 (rounded). 
VIX rose about 4% to 15.12.
The yield on the 10-year Treasury Note jumped to 2.77% over concern that interest rates might rise sooner than expected.

With Market Internals down today (and over the 10-day moving averages that I track) and the recent NTSM sell signal, it looks like the correction may be back on the table.   

The 10-day moving average of stocks advancing dropped to 49.6% at the close.  (A number below 50% for the 10-day average is generally bad news for the market.)   New-highs outpaced new-lows Wednesday.  The spread (new-highs minus new-lows was +83.  (It was +126 Tuesday). The 10-day moving average of change in the spread was minus-9. In other words, over the last 10-days, on average, the spread has decreased by 9 each day. The smoothed 10-dMA of up-volume has not had an up-day in the last 7-trading seasons; it was down again today.  The internals are negative 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. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.

The NTSM analytical model remained HOLD today.  The Price indicator is positive because up moves have been bigger than down moves recently. Sentiment is negative. Volume and VIX indicators are neutral.

I reduced 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.  I will return to 50%-stock allocation if the Market Internals of the NTSM indicators turn positive.  Internals could turn positive soon, but it all depends on the market.