Revenues Down this Quarter

YAHOO FINANCE - BREAKOUT

“… earnings…have been seen 72% of companies beating consensus, the sales side has been a huge disappointment…on the revenue side, we've seen a very weak earnings season," says John Butters, Senior Earnings Analyst at FactSet. "Only 42% of companies have beat revenue estimates so far, well below an average of 60% from the last four years. And if this trend continues through the balance of the season," Butters explains…"it will mark the worst quarter for positive sales surprises in over three years."…“The second trend he's monitoring is the ratio of negative-to-positive pre-announcements, which is running about three-to-one, up from a longer-term average of two-to-one. And when companies speak or give guidance, analysts react.”  Full story at…

http://finance.yahoo.com/blogs/breakout/q2-earnings-season-revenue-stupid-120429818.html

MARKET                                                                                           

Tuesday the S&P 500 finished 0.4% to 1379.  The VIX rose 5% to 18.93 today. 

Over the last month only 35% of the trading days have been up.  Sometimes that sort of negative trend actually precedes a rally so we’ll see what tomorrow (Wednesday) brings.

NTSM

The NTSM analysis was again BUY at the close on Tuesday. 

The volume indicator switched to neutral.  VIX and Price indicators are still positive.  Sentiment is 58% Bulls at today’s close.  That’s elevated but still a neutral reading and I think it gives the market some room to keep moving up.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  For my age, that is what most advisors recommend, however, I am normally much more aggressive.  I am underweight my usual aggressive allocation for stocks because there’s a lot of risk now.

Aruoba-Diebold-Scotti Business Conditions Index - Neutral

The wife left a note on the fridge.........
"It's not working!! I can't take it anymore, I've gone to stay at my moms!"
I opened the fridge, the light came on and the beer was cold.........
Who knows what the hell she was talking about!

MARKET                                                                                           
Monday the S&P 500 finished essentially unchanged at 1385. The VIX rose about 8% to 18.03 today.  That’s a big jump in the VIX for an unchanged S&P 500.  That could mean a down day tomorrow.

MINYANVILLE: “One thing overlooked in Friday’s weak Q2 GDP report was that YOY nominal GDP grew at 3.9% which is in line with the post-recession recovery average. “
Full story (covers mostly QE3 ) at: http://www.minyanville.com/business-news/the-economy/articles/gdp-federal-reserve-the-fed-fed/7/30/2012/id/42804#ixzz227O2KZ1E

FROM THE FEDERAL RESERVE

Here’s an interesting take on US business activity from the Federal Reserve.  The Aruoba-Diebold-Scotti Business Conditions Index “…is designed to track real business conditions at high frequency.”

Note: We construct the ADS Index using the latest data available as of July 27, 2012. This includes (1) initial jobless claims through the week ending July 21, 2012,

(2) payroll employment through June 2012, (3) industrial production through June 2012, (4) real personal income through May 2012, (5) real manufacturing and trade sales through April 2012, and (6) real GDP through the second quarter of 2012. Gray shading indicates NBER-designated recessions. The limits used on the y axis reflect the minimum and maximum values of the index over its entire history. From:
http://www.philadelphiafed.org/research-and-data/real-time-center/business-conditions-index/

By this measure, business activity doesn’t look bad as of last week.  Will those predicting recession be wrong again?  John Hussman, PhD (in economics) said again that another recession is already underway… (http://www.hussmanfunds.com/wmc/wmc120730.htm). Rather than guess I will just follow my indicators in the NTSM analysis. 

NTSM

The NTSM analysis was again BUY at the close on Monday. Price, Volume and VIX indicators are all positive on the market. 

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  For my age, that is what most advisors recommend, however, I am normally much more aggressive.  I am underweight my usual aggressive allocation for stocks because there’s a lot of risk now.

GDP Growth Drops in 2nd Quarter

NEW YORK (CNNMoney) – “The United States economy slowed in the second quarter amid weak consumer spending, government cuts and a rise in imports from foreign countries…Gross domestic product, the broadest measure of the nation's economic health, grew at an annual rate of 1.5% from April to June, the Commerce Department said Friday.  That's down significantly from a 2% rate in the first three months of the year.”  Full story at…

http://money.cnn.com/2012/07/27/news/economy/us-gdp/index.htm

It was just last year when every talking head on TV was discussing with great authority that 2% GDP-growth was “stall speed” and anything below that number was a sign of coming recession.  It didn’t happen last year, but there has been a steady stream of bad news recently.  In spite of the news, the market has been moving up since the 1^st of June and the market is never wrong…in the short term.  I am very cautious longer term though.  Perhaps there is a recession coming?  I’m not an economist so I won’t guess.

MARKET                                                                                           

Friday the S&P 500 finished up almost 2% to 1386. The VIX fell about 5% to 16.7 today.

NTSM

The NTSM analysis was BUY at the close on Friday. Price, Volume and VIX indicators are all positive on the market. 

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Durable Goods Orders – Down (?)

DURABLE GOODS ORDERS

BLOOMBERG - Orders Signal Slowdown in U.S. Business Spending: Economy

“A slump in June orders for equipment such as computers and machinery signals U.S. business investment will probably cool in the second half of the year and contribute less to the economic expansion…Bookings for non-defense capital goods excluding aircraft, a proxy for future corporate spending, dropped 1.4 percent, the third decrease in the past four months, according to Commerce Department data issued today in Washington.”

http://www.bloomberg.com/news/2012-07-26/u-s-durable-goods-orders-rose-1-6-in-june-on-aircraft-demand.html

The following chart (from the Federal Reserve) shows an increase in orders, but that’s only if airplane orders are included.

MARKET                                                                                           

Thursday the S&P 500 finished up 1.7% to 1360. The VIX fell over 9% to 17.5.

I have been suggesting that the market would move up, so it is always interesting when there is a significant move up on news.  This time, the news was that the ECB will begin another round of bond buying that will reduce borrowing costs for troubled Spain and Italy.  Technically though, the market internals and indicators that I track had already signaled that the market would probably move up.  This always makes me ponder whether the pros buy on inside information.  Perhaps, it’s simply that the pros can better interpret the impact of news on the market. 

That’s why I have chosen to focus on tracking the market (thru NTSM analysis) rather than the news or the economy.  Hopefully, the market itself will continue to give us clues about future direction. It’s never perfectly clear, and I’ll rarely make a call at the exact top or bottom, but with skill and a little luck, I usually can avoid trouble.

At this point, I think the S&P 500 can move up another 5% or so.  If it does, we’ll see where it goes after that.  Remember, the NTSM analysis doesn’t predict the future, so 5% is mostly guesswork.

To add a little to yesterday’s blog, I think the market is moving up because the rest of the world is buying US stocks.  We look like the best dog in the pack (a rather ragged pack I might add).  I don’t think that will last.  My guess is that earnings of US companies will fall and stock prices will eventually follow, but I don't know when. 

NTSM

The NTSM analysis was BUY at the close on Thursday. 

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Can the S&P 500 go Higher from Here?

It doesn’t seem logical that the stock market will keep going up (with all the bad news out there), but the US economy is still growing.  There are questions about how much longer that may last, though.  Even so, here’s an article that might give some hope for continued advance in the S&P 500.

From CNBC:

Think US Stocks Are Bad? Try Everywhere Else First

“U.S. stocks are outperforming the rest of the world by the biggest margin in eight years as Europe’s financial crisis and China’s slowing growth make America's troubles seem tame…“With this trend still in place, we believe investors should continue to overweight U.S. stocks, and more specifically, U.S. stocks which generate the majority of their sales in the U.S.,” wrote an analyst from Bespoke Investment Group, the research firm which brought this milestone to light in a note to clients.”
http://www.cnbc.com/id/48302869?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo

I think that gives some hope for the S&P 500 to move up from here, but I am not optimistic in the longer term.

MARKET                                                                                           

Wednesday the S&P 500 finished unchanged at 1338. The VIX fell 5-1/2% to 19.34.

NTSM

The NTSM analysis remains HOLD at the close on Wednesday. 

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

On the Brink of Depression?!

WASHINGTON (MarketWatch) Commentary…

Euro crisis brings world to brink of depression - Parallels to 1930s’ missteps unmistakable.  “The financial volatility in Europe may have created a situation that is now beyond the capacity of policy makers to control or curb…The crisis has now gone well beyond the prospect of breaking up the euro to the threat of a full-fledged financial and economic collapse in Europe that could plunge the world into a second Great Depression…German economist Fabian Lindner drew the parallel to 1931 in an op-ed last fall when he compared his country’s intransigence toward southern Europe now to the misguided harshness of the U.S. and France toward Germany in the earlier crisis.”  Full commentary at…

http://www.marketwatch.com/story/euro-crisis-brings-world-to-brink-of-depression-2012-07-24?dist=afterbell

MORE FED ACTION

WASHINGTON (MarketWatch) – “Federal Reserve officials are moving closer to taking new action to try to spur the economy, according to a report Tuesday by the Wall Street Journal. Officials at the central bank are growing impatient with the sluggish growth and high unemployment and worried that growth is too slow. The report said that conversations inside the Fed had turned toward how and when to move but did not find a consensus for what steps the Fed might take at its meeting next week.”  From Market watch at…

http://www.marketwatch.com/story/fed-moving-closer-to-action-wsj-2012-07-24?dist=afterbell

NOT EVERYONE AGREES WITH THE FED

Money Magazine (August 2012) - John Taylor of Stanford said in an interview in Money magazine this month that according to his research, short term attempts to juice the economy lead to higher unemployment and slower growth. He was critical of both the Bush and Obama administrations so his comments are not “political”.  He pointed out that the Fed bought 77% of the US debt in 2011. “By doing so, the Fed has created great uncertainty about the impact of its actions on inflation, the dollar, and the economy.”  He argues that “uncertainty” is bad for the stock market and the economy.  If I see a link on this subject, and we probably will see one in a few weeks, I’ll post it.

MARKET                                                                                           

Tuesday the S&P 500 finished down almost 1% to 1338. The VIX was up 8% to 20.15.

The S&P 500 fell below its lower trend line by about 1%.   After writing about taking a long trading position I decided that I have enough exposure to stocks at this point. (Cue the chicken: bwak, bwak, bwak.)  Bottom line, chicken or not, I have plenty of exposure without taking on even more risk.  There’s too much going on in the US economy (to the downside) let alone all the bad news out of Europe.

NTSM

The NTSM analysis remains HOLD at the close on Tuesday. 

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Rally Over? US Economic Activity Slowing

RALLY OVER

The bear market rally has ended (Elder & Lovvorn)

“Our indicators rallied to much lower tops, and when the market turned down on Friday, daily bearish divergences triggered. The bear market is back, and it is likely to challenge the June lows.”  Full story at…

http://www.marketwatch.com/story/the-bear-market-rally-has-ended-2012-07-23?dist=afterbell

 
That’s possible and we’ll know soon since the S&P 500 is now sitting on its lower trend line.  A drop of more than 2-3% would be the signal that it really is over.

Here’s a chart from Hussman Funds from this week’s Market Commentary.  It certainly doesn’t look encouraging.  Regular readers know John Hussman, PhD, has been negative on the market for some time.

Chart from Hussman Funds at…
http://www.hussmanfunds.com/wmc/wmc120723.htm

MARKET                                                                                           

Monday the S&P 500 finished down almost 1% to 1351.  The VIX was up 14% to 18.62 so the options boys got concerned and bought a lot of puts (options that make money when the market goes down).

The S&P 500 closed on its lower trend line, but once again I was running errands all day and missed a chance to buy a long trading position.  Since I still think the market goes up from here (for a while at least), I’d like to put some trading money to work on a short-term bet that the market will go up.  I am only writing about my trading portfolio here and that is less than 10% of my stock portfolio.  I don’t gamble (trade) with my entire portfolio.  Why risk your future?  The “My Invested Position” paragraph below covers my total portfolio.  If I do take a trading position, I’ll set a tight stop so that if the market goes down, I’ll get out quickly.

NTSM

The NTSM analysis switched to HOLD at the close on Monday.  VIX switched to neutral on today’s big run-up.  A few more days like today and the NTSM system will switch back to sell.

It is a weakness of the NTSM system that quick turnarounds may not be called correctly.  So we’ll see.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation overall.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Europe: Back, Bigger and Badder than Ever

FRANKFURT (MarketWatch) Europe stocks fall; Spain plunges on debt worries:

“European stocks posted broad-based losses Friday, with Spanish equities plunging as government bond yields soared on renewed fears the country could be forced to seek a full-fledged sovereign bailout due to its debt burden… “The news out of Spain prompted investors to focus their attention away from the QE3-or-no-QE3 argument for some good old risk-off trading,” said Neal Gilbert, strategist at GFT…”
http://www.marketwatch.com/story/europe-markets-struggle-to-maintain-momentum-2012-07-20

MARKET                                                                                           

Friday the S&P 500 finished down 1% to 1363.  The VIX was up 5% to 16.27.

The S&P 500 is reasonably close to its lower trend line so maybe I’ll get another chance on Monday to take a long trading position.  I’ve been too busy with visitors to do any trading recently.  I still think we go up from here just based on the NTSM indicators which have remained BUY 9-of the last 11-trading days.  Market internals look good too.  I am not super optimistic though; with so much bad news this market could turn quickly.  The S&P is only up about 1% over the last 11-trading days so that’s not very encouraging either.

NTSM

The NTSM analysis remains BUY Friday at the close.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Leading Indicators Down; Manufacturing Down (Philly Fed); Jobless Claims UP; but the NTSM Analysis Remains BUY

WASHINGTON (MarketWatch) — The index of leading economic indicators fell 0.3% in June to 95.6, mostly reversing the increase in May, the Conference Board reported Thursday…“The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity,” said Ken Goldstein, an economist at the Conference Board.”  Story at…

http://www.marketwatch.com/story/leading-economic-index-declines-in-june-2012-07-19

WASHINGTON (MarketWatch) -  Factory activity in the Philadelphia region contracted for the third straight month in July, the Philadelphia Federal Reserve Bank said Thursday…”Recent readings from the Philly Fed index are in sync with other data showing the manufacturing sector encountering significant difficulty, which unfortunately only promises to get worse as exports suffer and growth in domestic demand remains anemic at best,” said Josh Shapiro, chief U.S. economist at MFR Inc.”  Story at…

http://www.marketwatch.com/story/philly-factory-activity-stays-weak-in-july-2012-07-19-101033855

WASHINGTON (MarketWatch) - U.S. weekly jobless claims shoot back up - Applications for benefits jump 34,000 to 386,000

“Given seasonal adjustment challenges relating to annual summer shutdowns in the auto industry, the information value of claims is limited right now,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “The data should become “clean” again in the next couple of weeks.”  Still, the current level of claims indicates hiring in the U.S. remains soft.”

http://www.marketwatch.com/story/us-weekly-jobless-claims-shoot-back-up-2012-07-19

The above 3-articles don’t paint a pretty picture, but the Market is having none of it; it’s headed higher.

MARKET                                                                                           

Thursday the S&P 500 finished up 1/4% to 1377.  The VIX fell 4% to 15.45.. 

NTSM

The NTSM analysis is BUY Thursday at the close.

Market internals look good too.  VIX has fallen significantly.  Makes no sense to me; but I will follow the market and the NTSM system.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Beige Book Reports are Mediocre – NTSM is BUY Again

FEDERAL RESERVE BEIGE BOOK

MarketWatch - More Fed districts report slowdown

“The so-called Beige Book, which covered the economy between June and early July, was less enthusiastic than the “moderate” assessment of the last Beige Book. And now three regions, up from one, reported slowing growth.”
http://www.marketwatch.com/story/more-fed-districts-report-slowdown-beige-book-2012-07-18

The above is more evidence of economic slowdown, but the Fed says it will do more if needed.  Even though in a recent speech Bernanke said that the Fed actions seem to be having less effect on the economy (see 7 June Blog, http://www.blogger.com/blogger.g?blogID=606602026868381885#editor/target=post;postID=1477785570741546110), investors are buoyed by Uncle Ben’s promise to fix future problems.  Sorry, I don’t believe it.  On the other hand, the market does believe it, and that’s all that matters. That’s why the NTSM system switched back to buy.  The market is never wrong.

MARKET                                                                                           

Wednesday the S&P 500 finished up 2/3% to 1373.  The VIX fell 2% to 16.16. 

NTSM

The NTSM analysis is BUY Wednesday at the close. 

As I have been suggesting, stock market indicators have been looking good and they continue to do so.

The NTSM system doesn’t forecast the future, it merely analyses the S&P 500 to see if it is at a Top or Bottom.  Therefore; I can’t use it to predict how much higher the market will go.  I can guess though.  Let’s guess we get to the old,recent-high of 1420 (round numbers).  We’ll see.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352.  I now have a 50% stock allocation.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Bernanke says Growth Will Be Below 2% in the 2nd Quarter of 2012

BEN BERNANKE – GROWTH SLOWING

NEW YORK (CNNMoney) -- Federal Reserve Chairman Ben Bernanke gave senators a rather gloomy outlook for the economy Tuesday…Europe's debt crisis and fiscal cliff in the United States are threatening the recovery, he told the Senate Banking Committee in his semi-annual report to Congress. Meanwhile, economic growth has probably already slowed, and the unemployment rate is unlikely to fall below 7% for at least another year...Bernanke also noted concerns about economic growth, saying that after a 2.5% gain in gross domestic product for the second half of 2011, growth slowed to less than 2% in the first quarter of 2012, and he pointed to a "still smaller gain in the second quarter."  Full story at…
http://money.cnn.com/2012/07/17/news/economy/bernanke-senate/index.htm?iid=GM

So the Fed admits that the economy is definitely slowing.  It is unlikely that Bernanke would use the recession word even if that was his prediction.  Many private economists have been predicting recession.   Of course we remember they were saying the same thing a year ago; “We’re in recession!”  But we weren’t.  I don’t know if we’ll see a recession this time either.  I’m not going to guess.  The NTSM analysis just looks at the stock market with indicators in Price, Volume, Sentiment and VIX.  Currently, the indicators look good.

MARKET                                                                                           

Tuesday the S&P 500 finished up 3/4% to 1364.  The VIX fell 4% to 16.48. 

NTSM

The NTSM analysis is BUY Tuesday at the close. 

The S&P 500 did drop down to 1345 Tuesday morning, but I was busy all day and didn’t get a chance to buy a 2x fund or ETF for a trade.  Perhaps I’ll look at that possibility again tomorrow.

MY INVESTED POSITION

Based on the BUY signal 6 July, I moved back into the market on 9 July at S&P 500 1352.  I now have a 50% stock allocation.  I am underweight my usual aggressive allocation for stock because there’s a lot of risk now.

Retail Sales Decline 3rd Month in a Row – NTSM Remains BUY.

NEW YORK (CNNMoney) -- Retail sales declined for the third month in a row, as consumers grow increasingly concerned over the weakening economic situation in the United States and Europe…Overall retail sales in June fell 0.5% in the month, according to a Commerce Department report on Monday. The decline came as many were expecting growth, with economists surveyed by Briefing.com expecting growth of 0.2%.

http://money.cnn.com/2012/07/16/news/economy/retail-sales/index.htm?iid=EL

That’s pretty bad news in my opinion, but I am notoriously bad at predicting the stock market reaction to what I perceive as bad economic numbers. 

Really, that’s what we have now – a growing list of bad economic data (just check out some previous NTSM blogs), but the NTSM indicators, as well as other indicators I track, are very positive.  As a result, I am positive on the stock market in the short term.  (The NTSM system only tracks the stock market; there is no "economic" indicator.)

MARKET                                                                                           

Monday the S&P 500 finished down 1/4% to 1354.  The VIX rose 2% to 17.11. 

NTSM

The NTSM analysis is BUY Monday at the close.  

NTSM has been BUY 5 of the last 7-days and it is BUY today.  If the S&P drops to the lower trend line (now at 1340) I’ll probably go 2x-long using a Rydex leveraged fund (or a 2xETF such as QLD) for a trade up to the higher trend line.  If not, I won’t bother. 

I am not trading much these days because my short–term trading last year only made 5%.  I shouldn’t be too upset since some of those trades were to hedge long positions; but still, the record keeping is a pain in the butt.  I can’t imagine doing taxes for a day-trader.  I guess the way to avoid that is to confine trading to a IRA account. 

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation.  I am underweight my usual allocation for stock because there’s a lot of risk now.

Consumer Sentiment Down, but Not Out

CONSUMER SENTIMENT – from MARKETWATCH

“The consumer-sentiment index fell to a preliminary July reading of 72 from 73.2 in June. Economists polled by MarketWatch had expected a July reading of 73…“Things could be a lot worse,” said Paul Ashworth, chief U.S, Economist at Capital Economics, who noted that the sentiment index dropped to the mid-50s almost a year ago. “Overall, consumers remain cautious, but at least they aren’t panicking,” Ashworth said.”  Full story at…
http://www.marketwatch.com/story/consumer-sentiment-lowest-since-december-2012-07-13-101032218

Speaking of sentiment, the NTSM Sentiment indicator was 58%-bulls as of yesterday’s close.  That’s elevated, but still a neutral reading.

MARKET                                                                                           

Friday the S&P 500 finished up 1.65% to 1357.  The VIX fell 9% to 16.74. 

NTSM

The NTSM analysis is BUY, Friday at the close.  Price, Volume and VIX indicators are all positive (buy).

As I said yesterday, I expect the S&P 500 will move up from here, perhaps as much as 10%.  That’s really just a guess.  There is nothing in the NTSM system that predicts the future.

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation.  I am underweight my usual allocation for stock because there’s a lot of risk now.

Jobless Claims Fell

JOBLESS CLAIMS

(MarketWatch) — “First-time filings for unemployment benefits fell last week to the lowest level in more than four years, but the decline likely stemmed from fewer auto-sector layoffs than normal and other onetime factors that could soon be reversed:

Jobless claims sank 26,000 to a seasonally adjusted 350,000 in the week ended July 7, the Labor Department said Thursday. Economists surveyed by MarketWatch had projected they would fall to 365,000 from an upwardly revised 376,000 in the prior week…In all, the weekly claims suggests that while some of the recent weakness in employment growth is seasonal, in the absence of a solid pick-up in hiring, the trend in jobless claims suggests that we will likely see another weak employment print in July while the underlying pace of employment growth remains soft,” said Bricklin Dwyer of BNP Paribas in a note to clients.”

http://www.marketwatch.com/story/us-jobless-claims-drop-26000-to-350000-2012-07-12

I don’t put much faith in employment data.  It tends to be a lagging indicator. 

MARKET                                                                                           

Thursday the S&P 500 finished down 1/2 % to 1335.  The VIX rose 2% to 18.33. 

NTSM

The NTSM analysis is HOLD, Thursday at the close.  The VIX indicator is a whisker away from a buy recommendation and it it were positive, it would trip the overall NTSM analysis to buy..       

It may seem curious to be investing in the market now with a lot of bad news out there.  I feel that way; but the market says otherwise.  Breadth has been improving since the 4 June low of 1278.  There have been many more new-Highs vs. New-lows.  This is my most promising new indicator (not yet in the NTSM system) and it flashed buy a day or two past the 4 June low. I also watch the “smart money”.  Although “smart money” is not in the NTSM system either, it tracks the market price-action in the last hour of trading.  That’s when the pros take positions.  It too has been moving up as traders buy late in the day and that trend began before the 1278 bottom.  Google “Smart money Indicator” if you are curious.

Finally, the NTSM indicators of Price, Volume and VIX have all been positive over the past 5-days, though not all at the same time.  As odd as it may seem, I think the market will go up from here.  My guess is that there won’t be huge gains, but 10% from here is not unreasonable.  It could turn quickly on bad news so I’ll be careful. 

Chart wise, the S&P 500 is still in an uptrend, but that may change if it drops much further.  If it does, I’ll have to reevaluate.

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation.  I am underweight my usual allocation for stock because there’s a lot of risk now.

Sentiment is Elevated, but NTSM says BUY Stocks

MARKET                                                                                           

Wednesday the S&P 500 finished unchanged to 1341.  The VIX fell 4% to 17.95.  That is positive for the market and the drop in VIX triggered a buy in the VIX indicator within the NTSM model

NTSM

The NTSM analysis is BUY again today, Wednesday.  VIX kept NTSM in the BUY mode with help from the Price indicator.  VIX is the most reliable indicator in the system followed by Volume. 

On the worrisome side (there’s always something to worry about) Sentiment has been climbing steadily and now is 55%-bulls.  That’s getting elevated. 

The NTSM sentiment indicator is based on a 5-day moving average of the {amount of $ bet long (bulls)} divided by the {amount of $ bet long + amount bet short} in selected RYDEX mutual funds.  That’s %-bulls ignoring those who are neutral.  The indicator is a sliding one that is based on a daily statistical analysis calculated from the past year of sentiment data.  Currently the sell point stands at 67%.  The reason I use a sliding scale is that investors learn from the past and modify their behavior.  For example, Sentiment at the low in 2002 was 33% bulls.  In 2009, Sentiment was 15% bulls at the low because investors remembered the last bear.  For that reason, you can’t just set an arbitrary Buy or Sell point for %-bulls.

Even with adjustments, Sentiment is not a tradable indicator by itself since its buy or sell signals may be quite early or late.

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation.  I am underweight my usual allocation for stock because there’s a lot of risk out there – even if NTSM has repeated its BUY signal 3 out of the past 4-days. 

Morgan Stanley Cyclical Index Down on Recession Fears

The Morgan Stanley Cyclical index was down 3.6% today (4x the drop in the S&P 500) so it looks like investors got concerned about recession today.  The MS Cyclical Index had been improving for the last 2-weeks or so.  Today it gave up all of those gains.  I watch this because the cyclical stocks are more sensitive to recession concerns since those stocks would be hurt more in a recession.

MARKET                                                                                           

Tuesday started well, but gains didn’t hold. The S&P 500 was down 0.8% to 1341.  The VIX rose 4% to 17.72.  That’s a 9% rise in two days.  Again, the rise in VIX is not a good sign. 

The NTSM model has turned around quickly on occasion from buy, to sell, to buy, so I am a little concerned the NTSM system may signal a sell soon.  While I don’t like frequent moves, because I don’t want to trade the 401k, there is little choice if “the market” changes its mind quickly.  Also, no system is perfect.  So far it’s only a concern. As I noted yesterday, the trend is still up.  Volume has been declining over the past few days as the market has been going down so that is a relatively good sign too.

NTSM

The NTSM analysis is BUY again today, Tuesday. 

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation.  I am only 50% invested now because this looks like a high risk market. 

Stock Market Analysis from Clint Eastwood; Alcoa; Europe (again)

THE GOOD: Alcoa cites strong demand…

NEW YORK (CNNMoney) -- Aluminum producer Alcoa became the first Dow component to report second quarter results Monday, posting income that was in line with analyst expectations and saying that demand for its products is strong.

http://money.cnn.com/2012/07/09/investing/alcoa-earnings/index.htm?iid=HP_LN
No economic turndown worries there.

THE BAD:

Breadth (the number of stocks advancing vs the number declining) was down today, meaning that while the S&P 500 index was up slightly, the other 4500 stocks declined.  That’s not particularly a good sign.  I’ll watch that since it could lead to a quick turnaround.  It also probably represents a flight to quality and that should favor the big name companies.

THE UGLY:  EUROPE

FORTUNE -- Europe is starting to look more and more like the U.S. as it headed for the cliff in the fall of 2008. The continent's banking system is fragile and overleveraged. Making a scary situation even scarier is the lack of a central, credible authority to protect European bank depositors against losses should their banks fail.

http://finance.fortune.cnn.com/2012/07/09/europe-bank-run-avoid/?iid=HP_River

The NTSM theme:

http://www.youtube.com/watch?v=ZNGe7iK1O-4

MARKET                                                                                           

Monday, the S&P 500 was up 2pts to 1352.  The VIX rose 5% to 17.98.  The rise in VIX not a good sign.

NTSM

The NTSM analysis switched to BUY Friday and is HOLD today, Monday. 
If VIX and breadth continue in the wrong direction this may be a short lived buy call.

MY INVESTED POSITION

Based on the BUY signal Friday, 6 July, I moved back into the market on 9 July and I now have a 50% stock allocation as of the close.

Time to Buy Stocks (a little)

As I noted last week, the chart-trend is up now and it has been since that pesky 1278 low.  (I’ll log that one in my correction worksheet so in similar situations I’ll buy at the low.)  Most importantly, my analysis via the NTSM system indicates a BUY as of Friday’s close.  As previously blogged, both Price and Volume are positive and that is enough to trip the buy signal. Furthermore, statistical analysis of price-volume indicates the correction is probably over.   So we have a BUY.  Along those lines…

Here’s a comment from a poster on a day-trader discussion board: “…after 25 years of doing this, have seen how stock prices move up into the beginning of a recession, but bottom at the bottom of the recession, As in, prices don’t fall till the actual recession begins, but they start rising right when the bottom is happening.”

That’s a good observation.  It’s important to remember, even in bear markets there can be some fairly significant up trends.  So I will get back in the market today, Monday, but I will keep my invested position at only 50% stocks.  I think this is a risky time to be placing too large a bet on the stock market.  50% stock allocation looks good to me for now.  The upside here might be 15%-20% max.  The downside: maybe 40% lower than now.  The market could drop to 850 (or even lower), but will that happen in this cycle?  I don’t know. 

If the market suddenly decides it’s going down, the NTSM analysis should get me out fairly quickly.  Worst case would be a slow meltdown from here that would not trigger the NTSM analysis. That is less likely than a panic if the news continues to get worse. 

Unless the S&P 500 drops significantly below 1330, the trend is still up.

Bottom line: I’m “In” at 50% stock allocation at the close on Monday.  Cue Kenny Rogers: “You got to know when to hold ‘em.  Know when to fold em.”  It is a bit of a gamble, but that’s also true of staying out of the market.  We’ll see.  Decide for yourself.  If you can’t sleep at night, stay out.

June Jobs Report Weak

Busy day for me and I am just posting this Friday night around midnight, so I’ll make this short.

JUNE JOBS REPORT: Hiring weak, unemployment unchanged

NEW YORK (CNNMoney) – “Hiring was lukewarm last month, with employers adding jobs but not enough to bring the unemployment rate down.
The economy added 80,000 jobs in June, the Labor Department reported Friday, barely an improvement from the 77,000 jobs added in May. The unemployment rate remained at 8.2%.”  Full story at…
http://money.cnn.com/2012/07/05/news/economy/jobs-report-unemployment/index.htm

MARKET                                                                                           

Friday, the S&P 500 was down almost 1% to 1355.  The VIX fell 2% to 17.10.  Those Options Boys can’t make up their minds.  VIX is falling so relax, everything will be OK, or so says the VIX.

NTSM

The NTSM analysis switched to BUY Friday, based on Friday's closing data. 

Although the volume was to the negative side, the trend has generally been up and the NTSM volume indicator switched to buy.  The price indicator has been signaling buy for a while since the up moves have been larger than the down moves.  The charts show we are in an up-trend; for how long?  That’s the $64 question.  VIX is not falling steeply enough to generate a buy for the NTSM “best” indicator.

MY INVESTED POSITION

I remain out of the market…

Given the bad PMI numbers, on both the Manufacturing and the Service sector, I am not in a rush to get back in the market.  I’ll need to ponder the NTSM numbers some more. At this point I am inclined to see what happens Monday.

I’ll post before Monday 1130 AM if I decide to change my invested position.  If I get back in, it will only be 50% stocks rather than my usual “all-the-way” in or out position.