PHILLY FED NEWS
(Reuters) – “Factory activity
in the U.S. mid-Atlantic region contracted for a second month in a row in June
to its lowest level in 10 months as new orders tumbled, a survey showed on
Thursday.
The Philadelphia Federal
Reserve Bank said its business activity index dropped to minus 16.6 from minus
5.8 in May, far below economists' expectations for a reading of zero, according
to a Reuters poll.” A negative number
indicates contraction.
Full story at…
Contracting economic
activity? That’s recession; but the
widely accepted definition for recession is 2-consectutive quarters of
contraction. This is certainly the type
of news that might coroborate John Hussman’s analysis that the US is now in
recession. Of course this is far
different than what Ben Bernanke just stated in his Congressional testimony, so
maybe we shouldn’t put TOO much emphasis on one data point in the mid-Atlantic
region. Still, this news combined with
today’s market action seems to strongly suggest that the correction will
continue.
“BREAKOUT” (Stock
Analysis) - JIM ROGERS TAKE ON EUROPE
Regarding Europe problems
“…investing legend Jim Rogers says there's still a way to avoid the worst case
scenario. ‘My solution would be to let the people who have failed, go
bankrupt—declare bankruptcy," Rogers explains. "The banks lose money,
but then you start over; that's the way capitalism is supposed to work…Avoiding
short-term pain through activities like propping up "zombie"
companies to avoid the pain of failure has one drawback: it has never worked in
the history of economics. Japan has been doing it for decades, and the Nikkei remains
80% off highs made in the '80s…If you wait two years from now, five years from
now, when no government has any credibility and nobody will give you any more
money, then it's finished... you better get yourself a rifle and a bunker and
head to Asia.’"
Jim Rogers talked about the
worst case scenario being conflict (war) in Europe as various countries in the
EU begin to argue amongst themselves. He
compared it to the start of WWII. The EU
may split up, but I don’t expect shooting between countries. Turmoil? Rioting in the streets? Possibly, but
not war.
MARKET
Thursday, today, the S&P
500 fell hard, down 2.2% to 1326. The
VIX rose 16% to 20. As I have suggested
several times, I think the market will re-test the 1278 level. When it does, we will have some further
information that will help me decide whether it is time to get back in the market.
NTSM
The NTSM analysis remained
HOLD today however, indicators deteriorated significantly and all are now
neutral.
MY INVESTED POSITION
I remain out of the market…
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.
