BAD NEWS LAST WEEK
Wall Street Journal (print
version) and repeated at WSJ.com
15 Jun 2012 “Recovery
Slows as Global Risks Rise”
“The U.S.
economy is continuing to lose momentum just as global events that could derail
the recovery gather steam….On Wednesday; the Commerce Department said that
retail sales growth stalled in May and that April's gains were smaller than
initially believed. On Thursday, the Labor Department said first-time claims
for jobless benefits rose last week and the less volatile four-week moving
average hit its highest level since early April. On Friday, the Federal Reserve
said industrial production fell in May for the second time in three months, and
a separate measure of manufacturing activity in the New York region dropped
sharply.” Full story at:
The article points out
that economists, on the whole, are still predicting a lackluster 2% (or so)
recovery and no recession. My opinion: Economists
do not have a very good track record regarding recession predictions.
As a check of the
recession sentiment, I look at the Morgan Stanly Cyclical Index compared to the
S&P 500. Over the last 3-months the
Cyclical Index has underperformed the S&P 500 by about 8%. That tells me that many investors have
changed their strategy due to their perceived risk of recession, i.e., the
market thinks a recession has a high probability. (As a group, cyclical stocks should perform
worse than the S&P 500 in a recession; conversely, they should out-perform
at beginning of a recovery after recession.)
On a shorter term basis,
the Morgan Stanly Cyclical Index is only down about 1/2% over the past 2-weeks (compared to the S&P 500),
so the market is now waiting for more news before it moves appreciably up or
down.
When the market goes up on
bad news, that’s usually a good sign.
I’m NOT a believer, yet, so we won’t be taking any stock market advice
from the Monkeys. I’ll just have to
continue waiting.
MARKET
The S&P 500 finished essentially
unchanged to 1345. VIX fell 13% to 18.3 today, Monday. That’s a big move for the VIX and suggests
the correction may be over, at least as far as the options market goes.
The S&P 500 is 1%
above its upper trend line. That’s not
enough for me to suggest we’re now in an up-trend, but if it continues up, I’ll
have to. I’d also expect the NTSM
analysis to switch to buy. We’re not
there yet.
NTSM
The NTSM remained HOLD Monday.
The VIX has been dropping,
but not fast enough when compared to recent correction recoveries. The NTSM Volume indicator remains buy. There just aren’t any other indicators that
are confirming the buy…yet. If the VIX
continues down, NTSM will switch to buy soon.
MY INVESTED POSITION
I reduced my stock holdings to 30% (0% in stock
in the 401k) at S&P 1358 after 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). I cut my stock position to 15% on
17 May in order to maintain a 10% gain in a trading/longer-term position I had
in the QQQ.
