The S&P 500 was up 1.8% to 1277
today. VIX fell 2% to 23.
NTSM RETURNS
I’ve already posted the 2011 returns, but I
want to point out that there was a mistake in the NTSM compound returns on the
web page now titled, “Performance of the Navigate the Stock Market System.” Correctly figured, the compound returns over
the last 6-years calculate out to be 78% while the S&P 500 is up 3% over
the same period.
I think Bernie Madoff went to jail for
returns lower than that, but it’s not as crazy as it may sound. NTSM was up 12% in 2011; if NTSM had returns
of 12% each year, its investment value would double in only 6-years.
MUSING ABOUT WHAT TO EXPECT FOR 2012
2011 was eventful in the markets. We had a significant correction that lasted
17.5 weeks and bottomed in October at 1099 (S&P 500). We had a higher low on 25 November and the
market is now up 10% since then and 16% above the 1099 bottom.
I posted at the time why I thought the 1099
bottom was a significant bear market bottom, although I expect that we will
revisit lower levels before this bear market ends. Remember, this secular bear market probably
has at least another 8 or 9-years left.
To
review, here are the main reasons why I think we saw a major bottom on the 3rd
of October.
-
10-yr bond yields are rising again after bottoming at depression
levels.
-
Breadth hit extreme low limits at the bottom – as low as the
2009 recession bottom.
-
Sentiment hit extreme low limits around the bottom.
-
The market was up 7-days out of 9-days after we made the 1099
low.
-
VIX fell more than 40% after the low of 1099. It was 45 at the low. (VIX topped out at 80 in 2008.)
-
The market was up more than 1.75%, 3-days in a row after the low
– that has only happened after major lows.
-
Cyclical stocks outperformed the S&P 500 after the low.
During the correction the market fell
19.4% There are stats published for what
happens after corrections of 20% or greater. Are they applicable? Sure, 19.4% is “close enough” so let’s see
what we might expect. According to Ned
Davis research, the mean return 1-year later after a decline of 20% or greater
is 42% (data from Jun 1962 thru Sept 2022.)
The smallest return was 23%; the max was 69%. Based on that recent history, 2012 should be up
in a range of 8% to 56% from where the S&P is now with a bias toward the
lower end (just my opinion).
I said at the time that the market should continue to surprise
to the upside and I think those are all good reasons to believe that history
may favor us with a reasonably good 2012.
Unfortunately, it will not be without angst. The Eurozone Debt and the Eurozone Recession
(already underway) are big issues that will cause us pain. The extent of the pain will determine the quality
of US returns – no surprise there.
TODAY’S NTSM RESULTS
The
NTSM analysis is BUY today.
I
bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct
NTSM buy signal. I remain 100% long in
the long term portfolio (100% stocks in the 401k.). (See the page “How to Use
the NTSM System” – the link is on the right side of this page).
I
am 90% long in the trading portfolio.
Just
a reminder: 100% invested in stocks is way too much for most rational
folks. Don’t do it unless you have a
high tolerance for risk. While I like to
brag about the NTSM great performance, it did have 2-down years in the last 6. No system is perfect.
