Chairman Ben Bernanke - the labor market “remains far from normal”

(CNSNews.com) – “Federal Reserve Chairman Ben Bernanke said that the labor market “remains far from normal” and that the economy is expected to grow much slower than the Fed had previously estimated through the presidential election.

 ‘Specifically, their (Fed governors’) projections for growth in real GDP this year…have a central tendency of 2.2 to 2.7 percent. These forecasts were considerably lower than the projections…made last June.’

Because of the reduced economic growth projections, Bernanke said that the Fed does not expect significant improvement in the job market.

Full story at:  http://cnsnews.com/news/article/bernanke-job-market-far-normal-slow-growth-expected-through-2012

The S&P 500 greeted the tepid announcement with a yawn and finished the day at 1366, about 1/2% down on the day. (There was a big drop in the morning may have been due to a mistaken computer trade; but it wasn’t related to Bernanke because he had barely spoken more than a few words when the markets fell quickly.)

You may recall that in a past Blog post I noted that the correction we had in 2012 mirrored the S&P 500 correction that occurred in 2011 in depth and duration.  In 2011, we hit the top in February, so if this indeed were to be a mirror image; it would be time to sell soon.  It’s never really that easy though, so I am not suggesting that it is time to sell.  The 1099 low last October 3^rd was significant for a number of reasons already discussed (1 Feb 2012; 3Jan 2012; 7 Dec 201; 3 Nov 2011).  After that sort of significant bottom (if I am right about its significance) the following bull markets have lasted at least 7-months, but on average have lasted 26-months.  My point is simply I will pay a lot of attention to possible signs of an end to this cyclical bull within our ongoing secular bear market.

The NTSM Price and Volume indicators have been deteriorating for about the last 2-weeks.  The VIX indicator has been deteriorating for the past month.  Even so, Price and VIX indicators are still positive.  Sentiment has been pulling back and that is a positive sign too.

Today, Wednesday, the NTSM analysis remains BUY. 

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). 

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.

Federal Employees TSP (401-k Program): Selling the Small cap stocks in favor of the S&P 500

Over the past several weeks the Wilshire 4500 has been slipping a little bit relative to the S&P 500, so I will sell the “S” fund (Wilshire 4500) Wednesday and buy the “C” fund (S&P 500).

The “S” fund is still outperforming by about 4% year-to-date, but if the S&P 500 corrects I might lose that advantage.  

By moving on the last day of the month I preserve the 3-shifts allowed in a month for March.  I don't feel strongly about the move - it just seems like the time is right. 

Oil Expert, Chris Cook, predicts $2.50 gas

Excerpts from a commentary in the Asia Times (28 Feb 2012):

“The oil markets are completely manipulated and orchestrated, and the conductors of the orchestra have the benefit of having already held a rehearsal in 2008.

What is now happening is the end game: an orchestrated wave of noise that is drawing in speculative money. This is enabling the producers who are actually in the know to hedge by selling production forward during what they confidently expect will be a temporary - and pre-planned - managed fall in the oil price.

In my view, the steep decline which is planned could easily get out of hand in a not dissimilar way to the tin market in 1985 when the price collapsed - literally overnight - from $8,000 per ton to $4,000 per ton.

…absent a massive, and sustained, shortfall in oil supplies - which I cannot see occurring, since all involved have every interest in ensuring it does not occur - the oil price will, as I have already forecast, fall dramatically by the end of this year's second quarter at the latest. It's not a matter of if, but when it will happen.”

Chris Cook is a former director of the International Petroleum Exchange. He is now a strategic market consultant, entrepreneur and commentator.
Full story at...http://www.atimes.com/atimes/Global_Economy/NB28Dj05.html

The S&P 500 closed today at 1372, up 1/3%.  VIX was down slightly more than 1% to 18.  The S&P 500 continues to move up and the Dow broke 15,000.  There are a lot of late comers to the party!  That’s what this market needs to keep going – buyers.  Sentiment is very bullish, but is not yet extreme, so as of today, sentiment looks OK.

Today, Tuesday, the NTSM analysis remains BUY. 

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). 

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.

Abigail Doolittle - GDP Growth predicts a crash

Remember Abigail Doolittle’s prediction of a coming financial collapse I posted 2-weeks ago?  She warned of a “50%-correction” and then she said,“…the cause of the financial collapse, and probably the cause of what is likely to be a coming recession as well, based on these charts, (is)…GDP growth - it's in a descending trend channel.” 

Here’s a chart from Contrary Investor (link below) that illustrates her point; GDP growth peaked in 1979.  (Frankly, this is the most depressing chart I have ever seen; it shows lower highs and lower lows in GDP growth since then.)

Chart from http://www.contraryinvestor.com/mo.htm

Perhaps it’s not a coincidence that the GDP growth peaked about the time when the US debt began to rise precipitously, and unjustifiably since there was no national crisis as had been the case in prior years (see National Debt chart below).  As we have borrowed more to support our spending, we have produced less.  The above GDP chart may also (or instead) reflect our balance of trade since the US has manufactured less, but we have continued to consume.  I am not an economist so I will let you draw the conclusions.

Federal Debt chart from:  http://www.usgovernmentspending.com/federal_debt_chart.html

The S&P 500 has been trying to crack the old interim high of 1364 set on 29 April 2011

The S&P 500 closed today at 1368, up just 2-points.  VIX was up 5% to 18.2. 

While the S&P 500 did break its old interim high, we need to see the S&P higher still to be fully convinced.   If the S&P can get a couple percent above the 1364 level, it might pave the way for further significant gains.  (Back to the 1560 level is my guess, but it is only a guess.  There is nothing in the NTSM system that predicts the future – it analyses the market at each day’s close.) 

Today, Monday, the NTSM analysis at the close remains BUY. 

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). 

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.

Stock Market is still headed up…

Bloomberg (Wednesday, 22 Feb 2012) : Stocks in Europe Decline After Worse-Than-Expected PMI Data: European stocks retreated for a second day after a report showed services and manufacturing output in the euro area unexpectedly contracted in February. Story at: http://www.bloomberg.com/news/2012-02-22/european-stock-futures-are-little-changed-klepierre-accor-may-be-active.html

“Unexpectedly contracted”? Who’s surprised?  We suggested that Europe might already be in recession weeks ago.

On Wednesday I threw up a chart and suggested that the lower trend line had been broken and I expected that a new trend-line would be reset lower by a few percentage points so that the new channel would be about 5% high.  So far that has not happened.  Instead the S&P 500 bounced off the current trend line (shown red in Wednesday’s blog) and is continuing up.  That just means the market remains very optimistic.  I won’t complain about that, though it’s anybody’s guess how long it will last.

S&P 500 was up 2pts to 1366.  VIX was up 3% to 17.31.  It would appear that the options boys can’t make up their minds since VIX has bounced up and down over the last several sessions.  Even so, our VIX indicator is still a buy.

Today, Friday, the overall NTSM analysis remains BUY. 

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). 

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.

The next worry….Oil Prices?

Crude oil has become the next worry as the national average for gasoline was $3.58 as of Tuesday.  That’s about 50-cents higher than it was when the Great Recession started.  As reported by the World Harold,  “Ben Brockwell, director of data pricing and information services for the Oil Price Information Service, said Thursday he expects gas to reach a national average of $4.25, breaking the record of $4.11 set in July 2008.”  Full story at… http://www.kearneyhub.com/news/local/article_d9d6672e-5e5f-11e1-ae83-001871e3ce6c.html

The Morgan Stanly Cyclical Index continues to outperform the S&P 500.  YTD it’s about 7% ahead.  That’s a stat I look at to get an idea whether the pros are selling out of cyclical stocks in anticipation of a recession.  So far that appears not to be the case.

The S&P 500 closed at 1363, up roughly 1/2% Thursday.  VIX dropped almost 8% to 16.80.  The NTSM VIX indicator switched back to buy and that was enough to boost the NTSM analysis too. 

Thursday the NTSM analysis switched back to BUY.. 

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). 

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.

Introduction to Stock Market Chart Reading by Professor Trelawney

“Professor Trelawney delicately rearranged her shawl and continued, 'So you may have chosen to study Divination, the most difficult of all magical arts. I must warn you at the outset that if you do not have the Sight, there is very little I will be able to teach you. Books can take you only so far in this field…'”

I have occasionally noted that I am not really a chart person when it comes to divining the future of the stock market; it’s a lot like reading tea leaves to me, even though many seem to be successful.

 I’ve discussed the head and shoulders pattern and the “w” pattern on 13 February and yesterday, but that’s about it for me. However, it is very important to follow general chart trends.

For example, the chart below shows the channel as of yesterday’s close.  The S&P 500 is moving up within a very narrow band (channel) defined by the top black trend-line and the lower dashed red trend-line.  This is a typically narrow band that occurs after a significant bottom.  The channel is narrow because investors are buying after the bottom so the markets don’t drop much.  At some point, this band must expand to about a 5% (normal) spread as some profit taking occurs. 

When that happens, the channel will widen out and begin moving up within the 2-black lines.  That is why I have been suggesting that the S&P 500 could fall about 5% down to its lower trend line.

Today’s close below about 1360 means that a descent to the lower trend line probably has begun.   For the next several days/weeks we will have to endure the talking heads on TV wringing their hands that the rally may be over.  I see no point in being concerned unless the S&P 500 drops below its lower trend line – that’s now roughly 1310, but that lower trend line should change (hopefully upward) as time goes by. 

(Yesterday's) 3-month Chart from Yahoo Finance at…

http://finance.yahoo.com/q?s=%5Egspc

I can get very conflicted if the NTSM system gives a sell signal before we get below the lower trend line (and that is possible), but I’ll deal with that if it happens.  The NTSM system is looking quite stretched now, however, none of the indicators are now calling a sell.

The S&P 500 closed at 1358, down 1/3% today.  VIX was flat.

Today the NTSM analysis remains HOLD. 

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). 

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.

John Hussman remains cautious; the Market went nowhere

“As of last week, the Market Climate for stocks remained unfavorable, reflecting overvalued, overbought, overbullish conditions, rising yield pressures, an exhaustion syndrome, and reduced but continuing economic concerns.

As we extend the outlook horizon beyond several weeks…the risks we observe become far more pointed. The most severe risk we measure is not the projected return over any particular window such as 4 weeks or 6 months, but is instead the likelihood of a particularly deep drawdown at some point within the coming 18-month period.” – John Hussman, PhD, Weekly Market Comment, 21 Feb 2012, Hussman Funds http://www.hussmanfunds.com/

Famous stock market quotes: “Difficult to see. Always in motion is the future.” - Yoda

Here’s an interesting chart pattern from the recent, and not so recent, past that may give us clues to the future.

The “W” pattern or double-bottom is a “good” pattern since it is a graphical representation of a successful test of the previous low and portends a market rise.  I’d rather look at the numbers than the chart pattern, because I want to buy at the low (as we did in 2010) and not wait for the last leg of the “W” to form; but what the heck, the chart boys are happy.  Maybe we should be too!  Just another reason to think the S&P 500 might get to 1550 and make that triple top Abigail Doolittle mentioned last week (see 13 Feb 2012 blog below).

The S&P was up 1pt today, almost unchanged.  VIX climbed 2.3%.

Today the NTSM analysis fell to HOLD. 

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). 

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.

Do ICI Mutual Fund inflows predict a top?

Here’s an update on inflows into Long term US Equity Mutual Funds from ICI.  Buying is shown by red dots above the zero line; selling is shown below the line.  The black squares are the S&P 500.  The scale for the inflows (in red) is in millions.  That means that 30-billion dollars were taken out in 1-week at the bottom. 

The chart shows that mutual fund stock investors are just beginning to get back into stocks.  That happened about 3-months before the top last time, but that isn’t really a prediction.  This data isn’t a good enough predictor to base buying and selling decisions in your portfolio.  However, as a general rule, when everyone else is buying. It’s time to sell.  If everyone is selling, it’s time to buy.

The S&P was up slightly more than 1/4% today.  VIX fell 7.5%.

Today the NTSM analysis remained BUY. 

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). 

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.

Jobless Numbers were better than expected today…

NEW YORK (TheStreet) -- "That today's [jobless] number was not only better than expected but much better than expected can only be received warmly, providing further evidence that at least on the firing side of things, the labor market is improving considerably," Dan Greenhaus, chief global strategist, BITG, said in a note. "If this trend continues, one would have to believe, given previous relationships, that the monthly employment report will begin printing 200,000 plus job additions on a regular basis….The January producer price index rose 0.1%, after falling 0.1% in December. Core producer prices, excluding food and energy, rose 0.4% in January, the largest increase since July, following a rise of 0.3% in December. The Federal Reserve Bank of Philadelphia said manufacturing activity in the region picked up in February. The bank's general activity index rose to a reading of 10.2 from 7.3 in January."... Full story from…. http://www.thestreet.com/_yahoo/story/11421635/1/stock-market-story-feb16.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

There seems to be a lot of discussion going on that suggests that Greece won’t get the bailouts and will default.  The discussion seems to be, maybe that won’t be so bad.  We’ll see.

The S&P was up slightly more than 1% today.  VIX fell 9% today to 19.22

Today the NTSM analysis moved back to BUY. 

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). 

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.

Manufacturing UP - Greece Concerns overhang the Market

From Yahoo Finance as reported by Reuters: “WASHINGTON (Reuters) - U.S. manufacturing output rose solidly in January and a gauge of factory activity in New York state hit a 1-1/2-year high in February, showing a solid underpinning for the economic recovery…” 

So everything should be good right?  Not quite.  Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said “So everything looks rosy for manufacturers now, but we're still concerned that Greece's exit from the euro zone sometime this year will stop the global turnaround in its tracks." Full story at - http://finance.yahoo.com/news/U-S-manufacturing-housing-reuters-464105308.html?x=0

There were others who said the S&P 500 dropped today because richer countries in the Eurozone doubted Greece’s ability to live up to its future promises, especially since it had broken promises in the past.

Remember, none of this is really about Greece; it’s really about the European banks, the credit default swaps (insurance on the Greek bonds) and the European banking system if Greece fails.  

Wednesday the S&P 500 fell 1/2% to 1343.  VIX was up  8%.                     .

EARLY WARNING RECESSION CONCERNS

I have been suggesting that we were unlikely to see a recession because the Morgan Stanley Cyclical Index was outperforming the S&P 500.     

The theory is that if the market anticipates a recession, cyclical stocks (those stocks that respond to the business cycle) will show it first as the professionals start moving out of cyclical stocks and into more defensive positions.   So a simple test of recession risk is to look at the relative performance of the Morgan Stanly cyclical index and the S&P 500.

As of today the Morgan Stanly cyclical index is about even with the S&P 500.  Three weeks ago it was outperforming the S&P by 7.5%.  This is a concern, but I’d need to put a lot more work into this to see if it could be added to the Navigate the Stock Market system as an indicator.  Let’s just say it’s a worry and leave it at that.

NTSM ANALYSIS

Wednesday the NTSM analysis switched to HOLD. 

As of today none of the NTSM indicators are giving a sell signal.  A drop to the 1325 region would be right in line with our expectations and the S&P could even get to about 1275 because that is the 200-day moving average.  Any fall below that would present serious concerns.

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 remain all cash in the trading portfolio. There are too many unknowns now.

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.

Greece – the Crisis that keeps on giving

NEW YORK (CNNMoney) -- the Greek government reported Wednesday that Greece's gross domestic product, the broadest measure of a nation's economic output, fell 6.8% last year. That's much worse than the 6% contraction the government originally predicted.  Fourth-quarter GDP also continued to decline, shrinking 7%, compared with a 5% decrease in the third quarter.  The weakening economic data will add more pressure on the Greek government, which has been mandated to make a series of budget cuts to secure a second €130 billion bailout from the European Union and the International Monetary Fund.   Full story at… http://money.cnn.com/2012/02/14/markets/greek_economy/index.htm?iid=Lead

The Greek tragedy – the fat lady hasn’t sung yet.  There’s a lesson here: The longer the US puts off dealing with our overspending, the more likely we are to experience the same fate as Greece.  Delay taking the medicine and the disease gets worse.  

The S&P 500 was down 1/10% to 1350.5 Tuesday.  VIX was up 4% to 19.79.

In the last 50-days there have been 41-buy signals and only 9-hold signals in the Navigate the Stock Market analysis.  I didn’t see any stretch that was that bullish over the past 3-years.  I can’t really say how much further we have to go based on the NTSM analysis.  My guess based on past history (and as previously blogged) is that we could make the old highs around 1560 or so.

Today the NTSM analysis remains BUY again. 

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). 

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.

Stock Market Crash Predictions for 2012 – Doolittle, Rogers, & Hussman (sounds like a 60’s folk-rock group)

ABIGAL DOOLITTLE PREDICTS CRASH

Abigal Doolittle founder of Peak Theories Research said on CNBC Friday, "We could really be talking about a 50% correction….when we look at the long-term chart of the S&P 500, it's showing a failed double top. Those peaks reflect an outrageous borrowing binge over the last 30 years.  The failure reflects the liquidity efforts of the central banks starting in 2007 right through today.

Now, there is a shot that the S&P 500 could continue to be inflated up toward the old peaks of about 1550 for triple peak, but more likely the S&P 500 appears to be in a relatively small head and shoulders topping pattern (see my 2 Feb 2012 blog post for a general discussion of that chart pattern) that could take it down into a long-term descending trend channel.  We're talking 20 year monthly charts so really, over the long-term….the cause of the financial collapse, and probably the cause of what is likely to be a coming recession as well, based on these charts, (is)…GDP growth - it's in a descending trend channel. " CNBC video at…

http://video.cnbc.com/gallery/?video=3000072677#eyJ2aWQiOiIzMDAwMDcyNjg3IiwiZW5jVmlkIjoiaTQ3RldHNklEaEEydGlYbjRGTUo2dz09IiwidlRhYiI6InRyYW5zY3JpcHQiLCJ2UGFnZSI6IiIsImdOYXYiOlsiwqBMYXRlc3QgVmlkZW8iXSwiZ1NlY3QiOiJBTEwiLCJnUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ

I don’t see the head and shoulders pattern to which she referred.  There was almost a H&S pattern going back a week or so, but the right shoulder didn’t develop because the market broke upward instead of down.  I do, however, believe in the double or triple-top pattern in a bear market.  One need only look at the page “Compare the 1966 Bear Market to the Current Bear Market” (link on the right of this blog) to see that during the last secular bear market the tops and bottoms were visited regularly.

I’ll say this for the ad nauseam’th time (sorry to make up that word): we are in a bear market that started in 2001 and it won’t end soon.  Ms Doolittle is correct.  What we don’t know is when the market will turn down; is it now, or a year or two from now?

JIM ROGERS PREDICTS CRASH

Jim Rogers’ 2012 global outlook December 22, 2011

Finance News Network interview with American investor and author, Jim Rogers.

Jim Rogers said, “... I’m not too optimistic about what’s going to be happening in the world in the next two or three years, and maybe even longer. We have serious problems in the United States. You know, in 2002 we had an economic slowdown, 2008 was even worse because the debt was so much higher. The next time around the debt is going to be staggeringly higher. So, the problems are going to continue to get worse until somebody solves the basic underlying problem of too much spending and too much debt...for myself, I’m short stocks around the world, I’m short American technology stocks, I’m short emerging market stocks and I’m short European stocks….I own commodities…”  Interview and transcript at…

http://www.finnewsnetwork.com.au/archives/finance_news_network19496.html

 Jim Rogers has been a Bear for a long time, but I think he is a very rich bear.

JOHN HUSSMAN PREDICTS…CRASH?

While John Hussman isn’t using the word” crash”, he points out the risks are certainly there in his weekly market comment.  Mr. Hussman categorized the current market condition as “overvalued, overbought, over bullish, rising yield” syndrome.

 He suggested that we consider other similar points in history “...when the S&P 500 was at a Shiller multiple of over 19 times 10-year inflation-adjusted earnings, the index was at least 8% over its 89-week moving average, within 2% of a 3-year high, with Investors Intelligence sentiment over 45% bulls, less than 30% bears, or both, and with at least one yield measure above its level of 26-weeks earlier (corporate, Treasury bond, or T-bill). This set of conditions...self-selects for many of the worst times an investor could have chosen to buy stocks, based on the depth of the market's decline within the following 18 months.”

He noted that while the above criteria produced several false signals, the historic record shows 9-times from 1961 thru 2007 when the market declined between 20% and 55% after the “overvalued, overbought, over bullish, rising yield” syndrome occurred.

He wrote further, “My argument is certainly not that stocks will decline immediately, nor that they cannot advance further from present levels. Rather, the point is that even if such an advance emerges, the likelihood of those gains being retained by investors over the course of the full market cycle is exceedingly small.” – John Hussman, PhD, Weekly Market Comment, 13 Feb 2012, Hussman Funds http://www.hussmanfunds.com/

Regarding the bearish opinions, I still think we have more upside ahead.  That is mostly a guess though, and I will change my invested position when the NTSM system issues a sell.

I will say this: If enough people start calling a top at about 1550-1560 (like me), I'll start raising my guess.  If everone thinks the market is going to drop...it won't.

As noted earlier Monday afternoon, the NTSM analysis remains BUY as of Monday's close.

Quick Post…

On the go tonight, so this will be short.  If I get a chance, I’ll post a bit more later.

The Navigate the Stock Market system is still positive at the close Monday

NTSM analysis remains BUY.

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). 

Stock Market commentary by Frankie Valli…Greece is the word…

“Grease is the way we are feeling
This is the life of illusion
Wrapped up in trouble laced with confusion…”

Maybe Frankie knew something after all. Many talking heads blamed today’s market action on Greece.  I don’t know.  It may be just a technical reaction – the stock market rarely moves in a straight line and we were due for a pullback.  A drop to the 1310 area (5%) is due anytime.  Just the slight slowdown (of market climb) we’ve had has pulled our sentiment indicator back to more reasonable numbers.

Ben Bernanke – THE ECONOMIC OUTLOOK AND THE FEDERAL BUDGET SITUATION

Chairman Ben S. Bernanke before the Committee on the Budget, U.S. House of Representatives, Washington, D.C., February 2, 2012. 

“... recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe. However, there are signs that these concerns are abating somewhat...Globally, economic activity appears to be slowing, restrained in part by spillovers from fiscal and financial developments in Europe.”

Looking to the future for the United States Bernanke said, “...even after economic conditions have returned to normal, the nation will still face a sizable structural budget gap if current budget policies continue...(and) under current policies, show the structural budget gap increasing significantly further over time and the ratio of outstanding federal debt to GDP rising rapidly. This dynamic is clearly unsustainable.” 

"Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences....Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis.

To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time. Attaining this goal should be a top priority.”

Full text at...

http://www.federalreserve.gov/newsevents/testimony/bernanke20120202a.htm

Regarding the speech, a poster at a trader’s discussion board, wrote, “Keynesian economics...has failed.  That is what Ben said today, in so many words, and the media ignored it.  We are in for some pretty rough years ahead.” 

My take: This bear market is far from over and that means 1560 (or there about) is as high as we can go.

FOR A GOOD EXPLANATION OF THE FEDERAL BUDGET (youtube)

http://www.youtube.com/watch?v=u24nH03NccI&feature=player_embedded

NTSM Update

The Navigate the Stock Market system is still positive at the close Thursday.

NTSM analysis remains BUY.

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). 

Market commentary from Jules Verne - Around the World…

BRITAIN

The British Retail Consortium (BRC) has reported a 0.3% decline in UK retail sales last month, compared to 2011, making it the second-worst January since the survey began 17 years ago.  Full story at... http://www.bakeryinfo.co.uk/news/fullstory.php/aid/9764/Retail_sales_outlook_stays_bleak.html

FRANCE

France’s economy unexpectedly stalled in the second quarter as consumer spending plunged just as investors spooked by Europe’s debt crisis turn their attention to the euro region’s second-largest economy.  Full story at...

http://www.bloomberg.com/news/2011-08-12/french-economy-stalls-as-spending-declines.html

CHINA
“According to the China Securities Journal, China's electricity consumption in January fell by 7.5%. We estimate this may be the first decline since 2002 (excluding the financial crisis period in 2008-09), indicating industrial production may have slowed sharply in January.” Full story at ...

http://www.businessinsider.com/chinese-electricity-consumption-fell-massively-in-january-and-the-chinese-new-year-doesnt-explain-it-2012-2

ROMANIA

Romania's government has collapsed following weeks of protests against austerity measures, the latest debt-stricken government in Europe to fall in the face of raising public anger over biting cuts....Emil Boc, who had been prime minister since 2008, said Monday he was resigning "to defuse political and social tension…In 2010, Boc's government increased the sales tax from 19 percent to 24 percent and cut public workers' salaries by a quarter to reduce the budget deficit.

"I know that I made difficult decisions, but...In times of crisis, the government is not in a popularity contest, but is saving the country."  Full story at..

http://news.yahoo.com/romanias-government-collapses-protests-151141275.html

GREECE

“Greek political leaders agreed to a package of austerity reforms Thursday, marking the first step toward securing much-needed bailout funds…. a deal has been reached on the "basic parameters" of a deal with private sector creditors to write down a portion of the nation's debt….German Finance Minister Wolfgang Schaueble told CNN's Diana Magnay Wednesday. "No more promises, now they have to deliver." Full story at -

http://money.cnn.com/2012/02/09/markets/greece_bailout/index.htm?iid=HP_LN

My comment: The market ignored the Greek announcement today because it isn’t at all clear that they will follow thru on the promises.

So there is plenty to worry about in the world today.  The market responded by advancing a little more than 1/10% to 1352.  VIX was up 2.6% today and that may portend more volatility if the trend continues.

The lack of volatility feels good (small advances with occasional small declines), but recent history shows that after about a month of advancing with low volatility, the market may reach a short term top. We’ll see.

Regarding yesterday’s Blog, the Morgan Stanley Cyclical index continues to outperform the S&P 500, so I think the recession warning (from some) is not being borne out by the market, at least not yet..

The Navigate the Stock Market system is still positive at the close Thursday.

NTSM analysis remains BUY.

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). 

More recession Indicators and another economist's opinion...

CHAPEL HILL, N.C. (MarketWatch)  "Just when you thought that it might be safe to get back into the stock market...The Dow Jones Transportation Average is seriously lagging (the Dow Jones Industrial Average)...

...the Dow transports is thought by many to be a leading economic indicator — on the theory that companies in the transportation sector are a particularly sensitive barometer to how the economic winds are blowing. So weakness, even if it’s just relative weakness, could be hinting at bigger problems down the road...

...for that reason (Richard Russell, editor of Dow Theory Letters) is largely out of the stock market."  Full story at...

http://www.marketwatch.com/story/the-meaning-of-the-transports-weakness-2012-02-07

As I noted Monday the NTSM version of this type of advance warning is the Morgan Stanley Cyclical Index.  It continues to outperform the S&P so I am confident that this market has further to go.  On the other hand, a lagging transportation average is cause for concern on a longer term basis.  If the MS Cyclical index begins to lag too, then we’ll know that the market is pricing in possible recession.

ANOTHER WARNING SIGN?

Here’s another early warning caution: The Index of global shipping, Baltic Dry fell to a 25-year-low recently.  As reported by The Guardian economics Team, “The reason (many) used to study the Baltic Dry was because it measured dry freight costs, priced in dollars, as reported daily by brokers to London's Baltic Exchange. Prices for shipping coal, rice, wheat and other commodities were seen as a proxy for the strength of world trade and, by extension, of activity in the global economy. A falling Baltic Dry suggested that shipowners were cutting prices in the face of falling demand. In recent days, the Baltic Dry has fallen to a 25-year-low prompting concern that history is about to repeat itself.” 

Don’t panic yet though.  The shippers built many more ships in the past several years (even they didn’t predict the recession) and that has driven the price of shipping down so this indicator may not be very good at this point.  Full story at…http://www.guardian.co.uk/business/economics-blog/2012/feb/07/baltic-dry-shipping-index-25-year-low

ANOTHER ECONOMIST’S VIEW

Irwin Kellner, MarketWatch's chief economist, said in his blog today that he is optimistic on the economy, but he pointed out an interesting statistic that I offer simply as an item for thought: “... while the U.S. actually produces more goods and services today than it did before the recession began in 2007, it is doing so with about six million fewer workers. “ Full story at...http://www.marketwatch.com/story/is-glass-half-empty-or-half-full-2012-02-07?link=home_carousel

Well, enough!  The Navigate the Stock Market system is still positive at the close Wednesday.

NTSM analysis remains BUY.

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). 

Quick Post…

On the go tonight, so this will be short.

The Navigate the Stock Market system is still positive at the close Tuesday - NTSM analysis remains BUY.

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). 

John Hussman, PhD - “Overall, an economic downturn remains the most likely prospect…”

So here we are again; the Hussman commentary comes out negative and the markets are down.  Are they related?  I don’t know, but here’s an interesting point from the Hussman weekley commentary. (sorry if this is repetetive; but it's important)

Monday John Hussman, PhD wrote, “Overall, an economic downturn remains the most likely prospect, and it's not at all clear that the latest employment report changes that risk...To begin, it's useful to understand how  the Bureau of Labor Statistics calculated the 243,000 increase in employment that it reported for January.  Total non-farm employment in the U.S., before seasonal adjustments, fell by 2,689,000 jobs in January. However, because it's typical for the economy to lose a large number of jobs after the holidays, largely in retail trade, construction, and manufacturing, the BLS estimated that the "normal" seasonal decline in employment should have been 2,932,000 jobs in January. The difference between the two numbers, of course, was 243,000 jobs, which was reported as an increase in employment.”

He also analyzed the BLS adjustment and noted that the adjustment factor used was unusually large.  He suggested that job growth has usually been positive prior to recessions, and since it is a lagging indicator, it is of little help in predicting recession.

The most important point of his commentary regarded the current practice of many pundits to confuse lagging indicators with leading indicators.  As he said, “...we shouldn't expect weak job reports to lead recessions, though the year-over-year growth rate in payrolls invariably drops below 1.5% in the early months of a downturn (a level that we're still below).”  – From Hussman Funds, Weekly Market Comment, 9 Jan 2012 at...

 http://www.hussmanfunds.com/

I should note that Mr. Hussman was one of the few calling for a recession back in the summer of 2008 while the market advanced and most pundits were acting like the worst was in the past. At the time the S&P 500 was around 1400. It later bottomed below 700 so we really can’t afford to ignore John Hussman’s views, though he is not predicting a 2008-type collapse at this point, nor is he predicting that the market will fall now.

Mr. Hussman frequently points out that the market may continue to advance as the market climate becomes more hostile to stocks, so (according to him) we shouldn’t be buoyed by the strong climb in the S&P 500 recently either.

I am not an economist so I really don’t have an educated opinion regarding recession.  As I’ve suggested before, for the purpose of stock market analysis, I only care about the market’s opinion of the possibility of recession. (Recession is a huge amount of pain for many, so I care, but for the purposes of market timing, I really do only care about the market’s opinion.)

If the market anticipates a recession, cyclical stocks (those stocks that respond to the business cycle) will show it first as the professionals start moving out of cyclical stocks and into more defensive positions.   So a simple test of recession risk is to look at the relative performance of the Morgan Stanly cyclical index and the S&P 500.  At this point cyclical stocks are performing better that the S&P 500 suggesting that we will not have a recession in the US anytime soon. 

Markets tend to overshoot the mark however, so irrational exuberance could also be at play in this simple recession indicator thus limiting its effectiveness.   I am still looking at this as a possible NTSM indicator and I haven’t back tested the data fully.  In the interim, I think it is positive for the markets that cyclical stocks are outperforming the S&P 500; but really I must point out that both Mr. Hussman and I may be right – further market advances…followed by recession.

NTSM SYSTEM UPDATE

NTSM analysis remains 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).