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.
