Sentiment is all bullish…

A week ago I commented that Sentiment looked benign and was around 50%.  Since then sentiment has shot up to 63%-bulls (based on the amount of money placed in selected Rydex leveraged funds) and is nearly giving us a sell for that one indicator.  It takes more than one indicator to turn the NTSM system to the dark side though, and all the others are still bullish or neutral at this point.

 
My inclination is that the bullish sentiment is not a contrarian call, i.e., the correct call is probably long now.  That is especially true after Alcoa’s earnings beat today and that seems to indicate the world economy is not as bad as all the debt crisis publicity would have you think.  (Alcoa’s earnings were up 2.5 times last year’s 2^nd quarter.) We also have not seen the huge one-day spikes in sentiment that usually precede a significant top.  In the end, it’s all about earnings and if earnings continue strong, the European debt crisis is just a red herring.

The US debt negotiations, too, are likely to be resolved, although the resolution may only come after some dislocations (a fancy word for panic and pain) in the market.  But again, if the earnings are there, the market will quickly improve even if there is some sort of short term US payment of IOU’s rather than real cash.  Note that I don’t call it a default, because the US won’t default on its bonds.  The cuts necessary to balance the budget overnight (44% cut in spending) will take place elsewhere – not to the holders of our debt (China et. Al.)

The Navigate the Stock Market analysis remains HOLD which is its neutral position.

I remain 50% invested.  That is my fully invested position for the time being. I really want to see what will happen to the US debt issue before committing additional funds to the stock market.  This could still be a huge mess – even if it turns out to be relatively short term. 

In summary: Long-term I am bullish; short term - i'm keeping my head down.

Posting Early - No change in outlook

I'm posting early today and using the 2PM data.

Unless something drastic happens before the close, the NTSM system remains neutral with a HOLD recommendation.

I remain 50% invested and that is my current "fully-invested position" until we see some sort of resolution on the Budget negotiations.  This might turn out to be a buying opportunity; then again, it could turn ugly.

The jobs report Friday was awful…

From http://wallstreetpit.com/79145-unemployment-report-july-8

Consensus estimates for this report had an increase of 105k jobs.  The non-farm payroll report reflected an increase of a mere 18k.

The unemployment rate moved higher to 9.2% from 9.1%.

The average workweek declined by .1 hour to 34.3 hours.

Private payrolls did increase by 57k jobs but that was nowhere close to the expected increase of 125k jobs. Public payrolls declined by 39k.

The market responded by moving down 0.7%.

Breadth (advancing vs. declining stocks) continues to get worse on a long term basis.  That’s not healthy since it shows that the number of stocks advancing is falling even as the market has continued upward.  

The Navigate the Stock Market analysis remains HOLD which is its neutral position.

We can only guess whether it will turn up or down.

I remain 50% invested.  That is my fully invested position for the time being.

WARNING...Political Rant: I am an independent voter so I have problems with both republicans and democrats, but I think the republicans have reached a new low during the “debt negotiations.”  They are a bunch of lying ideologues when they state that we must cut spending instead of raising taxes in order to save jobs and the economy.  What they know, but won't say, is that cuts in spending will hurt the economy just as much as raising taxes. 

If the Government cuts defense spending and doesn't buy as many tanks, what happens?  The tank manufacturers will lay off workers, jobs will obviously be lost, and the economy will suffer.  It makes no difference whether the Gov't cuts a trillion dollars of spending or increases taxes by a trillion dollars, there will be negative impacts to the economy. 

I worked in Government long enough to know that we will need both tax increases and spending cuts to dig our way out of this hole.

From the perspective of this Blog, the Debt negotiations may bring a significant change in the stock market.  It could be down, as traders worry that spending cuts and/or increased taxes will bring about a double dip recession...or perhaps there will be no deal.  Maybe it will be up, and we’ll have a relief rally.  I’m not making a prediction either way – I will watch how the market moves and use the NTSM model to give us an indication of the future market direction.

Good day on Wall Street today…

VIX was down over 2% today; that’s good news.  It still needs to be watched, though.

Sentiment is OK.  Our sentiment indicator is a mildly elevated 52% Bulls.  The NTMS sentiment indicator is set to call a sell at 66% Bulls.  The significance of reasonable sentiment is that there is room for further improvement in the market.

So far this year we have had 2-sell signals and the NTSM system is essentially even with the S&P 500.  In Feb the drop was only 6.5%. In June the drop was 6%.  Frankly, I have tried to set the NTMS system so that it does not call sell signals unless we expect a drop greater than 10%, but really, we can only set the indicators based on past history, so the Buy/Sell signals will always be somewhat loose.  I am pleased to be even with the S&P’s performance (within ½% of even anyway).  I would expect better results if we were to see a significant correction.  NTMS needs volatility to work best.

The NTMS was neutral today at Hold.

I remain 50% invested.  That is my fully invested position for the time being.

VIX – Signaling trouble ahead?

Our VIX indicator is currently in neutral territory, but there is a troubling trend in the VIX overall.  Since the end of April the VIX has been making higher lows and higher highs, in other words, VIX is trending UP.  That is a dangerous trend that will have to be watched.  I suspect the budget wrangling is causing traders to react pushing VIX upward.  This could portend another correction; on a more positive note, it could also signal a big move up if the budget stalemate is resolved.  VIX doesn’t really predict the direction of a move – it just predicts more volatility (larger moves) ahead; but normally, Higher VIX means lower S&P.

The Navigate the Stock Market analysis is HOLD today.  The small Up-move sent up a cautionary flag that caused the system to drop from yesterday’s Buy.

I remain 50% invested. 50% is currenly my “fully invested position”

Big up-days and small down days in the Stock Market…no complaints

Big up-days and small down-days are sure to make our Price indicator happy and today that indicator moved to a Buy recommendation.  The Volume indicator has been Buy for a while so today the NTSM analysis moved to BUY overall.

We recommended a Buy at the close on 17 June and reentered the Market on Monday 20 June.   We are up nearly 5% since that Buy recommendation.

The NTSM BUY signal today just confirms that conditions are improving in the near term.

The Clowns in Washington continue to threaten to keep the Debt Limit where it is until they work out some sort of compromise.  Compromise does not seem to be in the vocabulary of many of the newly elected members of the House.  Many of them pledged not to raise any taxes.  That is unfortunate.  I know from personal experience that it will take spending cuts and tax increases (both) to get us out of the debt-hole we are in.

That is one reason that I am only 50% invested in Stocks.  I will probably remain there until we get some word from Congress how they plan to get us out of the Debt mess.  In other words, 50% is my “fully invested position” for the time being.

Friday’s ISM # was a positive surprise…

The Institute for Supply Management, a purchasing managers group, said Friday its manufacturing index registered 55.3 last month, up 1.8 points from May. A number above 50 indicates expansion.  Economists were expecting weakness in U.S. manufacturing. According to a survey by Briefing.com, the index was expected to register 51.1, down from 53.5 the prior month.

We’re at the halfway point for the year so it may be worthwhile to see how the NTSM system is working so far.  As of today, the NTSM system is up 6% while the S&P 500 is up 6.5%, so we have slightly underperformed the S&P 500.

Risk adjusted you’d have to say that’s pretty good considering that the NTSM system has only been in the market for 72 of the 180 trading days (approximately) this year.  The other 108 days we have been in cash.

The Navigate the Stock Market Analysis is currently HOLD but indicators are improving and we should see a Buy soon.

Even so, we re-entered the market on 20 June based on volume analysis.  (Too bad we had internet problems that delayed the re-entry by a day or the NTSM system would be even now.)

I am currently 50% invested in stocks overall.  That’s a conservative stock allocation simply reflecting the high degree of unresolved issues in the market place and my status as an old guy.