Tuesday, April 29, 2014

Consumer Confidence…Overvaluation…Presidential Cycle

CONSUMER CONFIDENCE FALLS SLIGHTLY (Bloomberg)
“Confidence among U.S. consumers declined [slightly] in April from a six-year high as Americans became less enthusiastic about the economy and labor market.”  Story at…
http://www.bloomberg.com/news/2014-04-29/consumer-confidence-index-in-u-s-decreased-to-82-3-in-april.html

ALL FINANCIAL ASSETS OVERVALUED (CNBC)
"The quantitative easing and the excess money and the low interest rates have driven pricing up of almost all financial assets to beyond what their intrinsic value might be," Joshua Harris, co-founder and chief investment officer of $161 billion private equity firm Apollo Global Management, said Monday at the Milken Institute's Global Conference in Los Angeles.” Story at…
http://www.cnbc.com/id/101620735

PRESIDENTIAL CYCLE – WE’RE IN THE MID-TERM YEAR (Marketwatch)
"Stephen Suttmeier, technical research analyst at Bank of America Merrill Lynch… points out there’s a more than 23% chance of the broader stock market shedding a fifth of its value sometime before October…‘The Mid-term year has a higher-than-average risk of a pullback of 20% or more during the 6-month periods beginning in January through August, especially during the March-August and April-September periods.’" – Wallace Witkowski, “The Tell” at…
http://blogs.marketwatch.com/thetell/2014/04/29/risk-of-20-stock-correction-highest-until-october-b-of-a-s-suttmeier/

GARTMAN OUT OF THE MARKET AGAIN (CNBC)
Dennis Gartman, editor of The Gartman Letter, is…starting out this week back on the sidelines. ‘I do not like switching back and forth. It's not fun,’ he said on CNBC's ‘Fast Money.’ ‘I would rather be consistently bullish. It's still a bull market and the worst that I'll become is neutral of stocks.’" Story at…
http://www.cnbc.com/id/101621370

MARKET REPORT
Tuesday, the S&P 500 was UP about 0.5% to 1878 (rounded).
VIX was DOWN about 2% to 13.71.
The yield on the 10-year Treasury Note fell slightly to 2.69% at the close.

The Bond Ghouls still seem to have concerns about the stock market.
 
I’m going to leave this posted until the S&P 500 breaks thru the old highs: The S&P 500 has closed in the vicinity of 1880 about 8 to 10 times since 31 December.  The index has only closed above 1880 3-times and then only about ½-% higher.  It needs to punch higher or the correction will be back.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing on the NYSE decreased to 57% at the close.  (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Tuesday.  The spread (new-highs minus new-lows was +83.  (It was +42 Monday.) The 10-day moving average of change in the spread was +7.  In other words, over the last 10-days, on average, the spread has INCREASED by 7 each day. The smoothed 10-dMA of up-volume increased today.  The internals remained positive 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. 
 
NTSM
The NTSM analytical model for LONG-TERM MONEY remained HOLD Tuesday.  Sentiment climbed to 81%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. This is a very high number and on a statistical basis Sentiment is now negative.  The VIX, Price & Volume indicators are all neutral.


MY INVESTED POSITION
I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.