The University of Michigan
Consumer Sentiment number was 77.8 for May, up from 76.4 in April. As Rick Santelli of CNBC said, “I'll tell you
what, that is definitely much stronger than expected. As a matter of fact, 77.8
is going to be the highest level going back to January of '08 at 78.4. So that
really is a whopper of a number and keep in mind, that is a preliminary read, so
it's not the final read that goes (into) the books. But that's a big number, no
dismissing it. I would think that that's going to be an optimistic read for the
equity markets…” Full video at:
That was early Friday so
the markets apparently shrugged it off. If
the market doesn’t go up on good news – that’s a bad indicator for the near
term. Consumer Sentiment tends to follow
the stock market, so a solid number is not too surprising and maybe the traders
arrived at the same conclusion. No
surprise – no market reaction.
I have been experimenting
with an indicator that is based on the Morgan Stanley Cyclical Index. The theory is that the smart money will sell
the cyclical stocks faster than the S&P 500 stocks if investors are worried
about recession. I haven’t had the time
to back test this as much as I’d like so I am not using it as part of the NTSM
analysis, but I do like to keep track of it.
Today the Morgan Stanley Cyclical Index indicator flashed sell. That doesn’t mean much – but it is worth
noting. It's another indicator that the market is not healty.
MARKET
The S&P 500 was DOWN
0.34% Friday to 1353. VIX rose 6% to 19.89.
NTSM
The NTSM analysis shifted back
to SELL Friday. VIX went up so our
indicator shifted to sell. The Volume
indicator remains sell.
MY INVESTED POSITION
I reduced my stock holdings to 30% in the long-term portfolio on
the SELL signal on 9 May 2012. (See the page “How to Use the NTSM System” – the
link is on the right side of this page).
With 30% remaining in stocks, I will make some money if the sell signal is wrong. Conversely, even if the market loses half its value, I would only be down 15% of the portfolio.
