Navigate the Stock Market: March 2013

Thursday, March 28, 2013

Percent Above the 200-day Moving Average

I suggested yesterday that I would post a few details on why I think the market is topping here’s one:

PERCENT ABOVE 200-dMA (Can you trade it? Maybe)

I have always suggested the answer to that question was no, because the value at tops varies quite a lot. In October of 2009 the S&P 500 was trading at nearly 21% above its 200-day moving average and the market didn’t top out until April of 2010 and by then the %-above the 200dMA had fallen to a more reasonable 12%. Clearly, the bullishness reached extreme levels after the major bear market bottom in March of 2009. Percent above the 200-dMA was 15% and 12% at the tops in 2011 and 2012 respectively. Since there’s a lot of variation I decided to look at this from several different angles.

Statistical analysis shows that the most recent tops occurred shortly after the time the standard deviation of the 200-day data set (for %-above the 200-dMA) reached about 2-standard deviations above the norm. That means that the values exceeded 75% of the data set. While that is interesting, there is enough difference to make it a difficult value to use for investing decisions (It was 2.3 standard deviations in 2011).

The trend in the 200-dMA is another matter. I think the downward trend in the peak values of the %-above the 200-dMA shown in red on the chart indicates the S&P 500 is topping now. The peaks in the %-above the 200-dMA coincide reasonably with the peaks in the S&P 500, though this is far from an exact science.

I also looked at this question from a third perspective. Since %-above the 200-dMA is a reflection of sentiment, I combined the %-above the 200dMA with the sentiment data in the NTSM analysis to produce the data shown green in the chart above. Since the green data-points tend to suggest a top when the value reaches 6.5% (the horizontal green line), this too suggests the S&P 500 is topping, though you can make an argument that we haven’t gotten to the top quite yet.

The above arguments suggest a top, but I still am running daily numbers in the NTSM system and they remain neutral. There have been signals within the NTSM system that have suggested a top and I will continue my discussion of a top later.

MARKET RECAP
Wednesday, the S&P 500 finished up 0.4% to 1569 (rounded).

VIX fell 3% to 12.70.

NTSM

Thursday, the NTSM analysis remained HOLD at the close. The numerical analysis has not yet confirmed my “off-the-grid” top-call.

Sentiment is a sell; Price is a buy; and Volume and VIX are in neutral. VIX is more negative today, so perhaps the NTSM analysis will issue a warning next week.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500-1525), due to my risk tolerance rather than the numerical NTSM analysis. To put it bluntly, I currently have no tolerance for risk. (If I were strictly following the NTSM numbers, I'd still be heavily invested in stocks.) My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

Wednesday, March 27, 2013

Another Crash Prediction

THE BIG ONE (50%-DROP) - LATE 2013
“I think we are now beginning or very soon about to begin the next (slightly bigger) dip lower, of 5% to 10% over Q2, taking the S&P from the 1575/1550s down to the 1450/1475 zone…I am fully expecting new all-time nominal highs...in Q3...Lastly, as per my last note, I remain as convinced as ever that the bullishness that will likely prevail at that time will come under extreme scrutiny and pressure over late 2013 and 2014.” - Bob Janjuah, Managing Director, Head of GFI Tactical Asset Allocation, Nomura International Plc. Full story at ZeroHedge at...
http://www.zerohedge.com/news/2013-03-26/bob-janjuah-tactical-short-we-are-not-there-yet-big-one

THIS TIME IS DIFFERENT?

“I always like to remind clients that, in the run up to the 2000 and 2007 highs, before the significant collapses that followed in the subsequent 18/24 months, markets seemed infatuated in Greenspan and his famous ‘Put’ the same way today’s teenagers seem infatuated with Justin Bieber, investor complacency was off the charts, volatility was at record lows, belief in ‘the system’ was sky high, and positioning was at extremes.” - Bob Janjuah on his blog at...
http://bobjanjuah.blogspot.com/

UNDERSTANDING THE GREEK BANK FAILURES IN 3-SENTENCES (Mike Shedlock)

“What sunk Cyprus now rather than later was Cyprus was dumb enough to be in Greek bonds. So why did Cyprus stay in Greek bonds so long? The answer is Cypiot banks were foolish enough to believe ECB president Jean Claude Trichet when he insisted there would be no haircuts on Greek bonds.” – Mish Shedlock, Global Economic Advisors. Full story at… http://globaleconomicanalysis.blogspot.com/2013/03/the-axe-is-in-position-only-timing-of.html#sLXkVOIKXQvQLalo.99

MARKET RECAP
Wednesday, the S&P 500 finished down 1Pt to 1563 (rounded).

VIX rose 3% to 13.15 so the options boys aren’t all that sure about market direction. In fact the VIX indicator in the NTSM system is squarely in neutral position so VIX is not giving any clue about future market direction.

NTSM

Wednesday, the NTSM analysis remained HOLD at the close. The numerical analysis has not yet confirmed my gut feeling.

Sentiment is a sell; Price is a buy; and Volume and VIX are in neutral. Like the market, confusion reigns.

It still looks like the market is at, or very close to a short-term top. I have no indication that this is going to be anything more than a 10% correction. I’ll try to post more tomorrow regarding some further details, but to list some reasons now: Breadth, %-above the 200dMA, ICI money market flows; statistical analysis of price-volume action; sentiment; price action in mid-March all are showing signs of trouble.

MY INVESTED POSITION

Tuesday, March 26, 2013

Consumer Confidence Down

CONSUMER CONFIDENCE DECLINES (Reuters)
“The Conference Board’s index declined to 59.7 from a revised three-month high of 68 in February, data from the New York-based private research group showed today. Economists surveyed by Bloomberg projected the March measure would fall to 67.5. ‘This is really quite a big hit,’ said Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors Inc. in White Plains, New York, who projected a reading of 63. ‘The longer confidence stays down and the further it falls, the more chance that it will be reflected in weaker spending.’” Full story at...
http://www.bloomberg.com/news/2013-03-26/consumer-confidence-in-u-s-declined-more-than-forecast-in-march.html

INVESTMENT COMPANY INSTITUTE

The Investment Company Institute (ICI) reported inflows of 849-million dollars in domestic long-term mutual funds for the weekly reporting period ending 13 March 2013. So after 2-weeks of outflows totaling 1.7-billion dollars, some new money returned to Domestic Equity funds. ICI has seen inflows in US stock funds since January 2013.

As I have previously noted, the only time money went into domestic stock funds for more than one-week over the past 2-years (before January of 2013) was at the last top in February, right before the stock market corrected 6%. That was followed by choppiness and eventually a 19% correction that completed in October of 2011

1^ST QUARTER EARNINGS PROJECTIONS (FactSet.com)

“The estimated earnings growth rate for Q1 2013 is -0.7%. If this is the final growth rate for the quarter, it will mark the second year-over-year decline in earnings for the index in the past three quarters... The estimated revenue growth rate for Q1 2013 is 0.6%, down from an estimate of 0.9% at the start of the quarter. Only two of the ten sectors are predicted to report a decline in revenues: Energy and Materials.” - FactSet.com

The following commentary is more cynical than I like, but really, what if everything the Treasury and Federal Reserve is doing (and has done) has been to save their crony friends at the too big to fail (TBTF) banks?

WHY THE GOVERNMENT IS DESPERATELY TRYING TO INFLATE A HOUSING BUBBLE – Hugh Smith

“If we want to understand why the U.S. government is doing its best to inflate another housing bubble, we must start with the Devil's Pact partnership of the government and the "too big to fail" banks. Simply put, the TBTF banks would not exist without the Federal Reserve and Federal government bailouts, subsidies and protection from transparent marked-to-market pricing of the banks' collateral and risk.

The basis if this partnership is simple: the banks' enormous profits and financial power have enabled them to capture the regulatory machinery of the government (the Central State) and the political machinery controlled by its elected officials.” Full story at Financial Sense at...

http://www.financialsense.com/contributors/charles-hugh-smith/why-government-is-desperately-trying-to

MARKET RECAP
Tuesday, the S&P 500 finished up 0.8% to 1564 (rounded) as it squeaked up to a new high. So the market made a new high one-day after I called the top.

I think the market is trying to make me look stupid. HEY MARKET, DON’T BOTHER - I DO A GOOD ENOUGH JOB LOOKING STUPID WITHOUT YOUR HELP!

Well, it was only one-half point above the old top and Tuesday’s top was on very low volume (20% below this month’s average volume), just like the last top (8-trading days ago). I’d say there’s not a lot of conviction from investors at this point.

Today’s (Tuesday’s) close was 9.2% above the 200-dMA. At the prior top on 14 Mar it was 9.9% above the 200-dMA.

VIX fell 7% to 12.77 so that’s good news for the bulls.

The 10-day moving average of the percent of stocks advancing continues to fall. The market is going up, but fewer and fewer stocks are participating. Over the past 10-days, 53% of stocks have gone up. In the middle of January it was 64%. That trend signals a market that is not too healthy and makes us wonder how much longer the trend will persist.

NTSM

Tuesday, the NTSM analysis remained HOLD at the close.

MY INVESTED POSITION

Monday, March 25, 2013

Where’s the Bubble? - Hussman has an Answer

CORPORATE PROFITS (John Hussman, PhD)
“One of the striking things about the late-1990’s bubble was that even investment professionals who should have known better were swept into New Economy thinking... it is the absence of an obvious bubble in any individual sector, and instead a bubble in profit margins across the entire corporate sector, that is likely to be the “hook” that drags investors deep into eventual bear market losses [this time]...Warren Buffett once noted ‘when people forget that corporate profits are unlikely to grow faster than 6% per year, they tend to get into trouble.’” - John Hussman, PhD, Weekly Market Comment, “The Hook”, Hussman Funds at...
http://www.hussmanfunds.com/index.html

John Hussman further noted that corporate profits are now running near 11% of GDP “...a level that is clearly explained by massive federal deficits and depressed personal savings...”

As he noted in his commentary, this doesn’t mean that an immediate decline is necessary. As was the case in 2000 and 2007, further limited advances are possible. I would suggest that, in the short term, advances are limited to the 0-5% range since the markets have rarely exceeded levels higher than 15% above the 200-day moving average (dMA). As of today’s close, the S&P 500 is 8.4% above its 200-dMA. Over the last 2-years, the S&P 500 has corrected at a level of 10% above its 200-dMA and that was also true in 2007 before the last top.

CYPRUS

The “solution” for Cyprus seems to be very similar to a proposal suggested in the Wall Street Journal last week: let the banks fail and protect insured depositors. Bondholders, stockholders and depositors whose deposits exceed the insured limit will lose. The amount of loss remains to be seen. This was the expected outcome. I am not sure that a bank failure is ever good news, so it will be interesting to see how the markets react this week. Today - not so good.

HEAD AND SHOULDERS…TRIPLE TOP…OR BOTH

The chart below shows the S&P 500 over the past several weeks. There is a weak head and shoulders pattern that may be signaling a top. A head-and-shoulders pattern is one of the most reliable patterns used by chartists. The good news (if there is one) is that targets associated with the pattern would only indicate a low of about 1525 and that is why I termed it a weak signal. The target is assumed to be the difference between the head and the lower shoulder – of course it could continue lower. I think it is open to interpretation whether the neckline is the horizontal dashed blue line or the dashed down-sloping black line.

The pattern also represents a triple top since all three peaks are within ½-percent of each other. The peaks are close together though (less than 2-weeks for the entire pattern) and that is not as strong as if the pattern had occurred over a longer time, at least in my opinion.

Chart by Navigate The Stock Market

No guarantees that this is the top, but taken with my relevant discussion on Friday (http://navigatethestockmarket.blogspot.com/2013/03/sentiment-at-extreme-levels.html), I think it tends to provide some further evidence to support my feeling that the top is in. As on Friday, I am suggesting the top was on the Ides of March, at S&P 500 1563. As always, we'll see.

MARKET RECAP
Monday, the S&P 500 finished down 0.3% to 1552 (rounded). VIX was up 1% to 13.74.

NTSM

Monday, the NTSM analysis remained HOLD at the close.

MY INVESTED POSITION

Friday, March 22, 2013

Sentiment at Extreme Levels

SENTIMENT
I define sentiment as %-bulls using selected long/short Guggenheim funds by calculating Bulls/(Bulls + Bears) based on assets in the funds at the close on any given day. My Sentiment indicator is then just a simple 5-day moving average (dMA) of the daily data.

I have reviewed the 5-tops in the S&P 500 over the past 3-years and noted that sentiment has peaked at 63%-bulls (5dMA) around those tops. Previously, my sell-signal for sentiment had been 67%-bulls (5-dMA). That really is an indication that investors change their behavior, so I have adjusted the Sell signal for the sentiment indicator to 63%-bulls. The buy signal remains unchanged.

For now, the important value is the sell-at-the-top signal. The 5-dMA %-bulls was 63% at yesterday’s close so sentiment is suggesting a top.

Sentiment is only one indicator and the NTSM analysis requires more than one indicator to generate a sell signal. Sentiment usually (but not always) peaks after a top when the buy-the-dip crowd jumps in.

Currently, Price, Volume, and VIX indicators remain neutral so the Navigate the Stock Market analysis remains HOLD at the close on Friday.

STATISTICALLY SIGNIFICANT DAYS

The last three days (Wed thru Friday) have been statistically significant days (exceeding a high percentage of the data set) based on today’s move in price-volume when compared to previous data. Normally, a “statistically significant” day occurs with at least a 1% change in price. The lack of volatility has reduced this number. One normally sees a number of significant days at a top due to investor conflict. Tops seem to bring out strong feelings in investors – both buying and selling. This creates more movement in price.

The last three-days have been up-down-up. You may recall that I was calling for at least a 1% up-day to suggest the top was in. That 1% was based on the “usual” statistically significant day. It is not as clear that these lower values (averaging 0.75% over the three days) are as meaningful, but I suspect they are. That’s a long-winded way of saying it looks like a top is in to me.

The NTSM analysis hasn’t confirmed it yet. We’ll see.

MARKET RECAP
Friday, the S&P 500 finished up 0.7% to 1557 (rounded). VIX was down 3% to 13.57.

NTSM

Friday, the NTSM analysis remained HOLD at the close.

As noted above: Sentiment is a Sell and other indicators are all neutral leaving a HOLD for the overall NTSM analysis.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March, due to my risk tolerance rather than the numerical NTSM analysis. To put it bluntly, I currently have no tolerance for risk. (If I were strictly following the NTSM numbers, I'd still be heavily invested in stocks.) My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

Thursday, March 21, 2013

A Trifecta of Disappointment

The front page of today’s Wall Street Journal headlined: “FedEx Customers Flee Next-Day”; “Oracle’s Sales Stall”; and “Suntech’s Bankruptcy Rattles US Investors”. Add todays’ poor earnings result from Caterpillar and the bad news is liable to gain traction. I’ll ignore the Chinese company, Suntech, but earnings disappointments from a Tech company (Oracle); a transportation company (FedEx); and the bellwether cyclical stock (Caterpillar), are a trifecta of very good reasons for a stock sell-off.

The S&P 500 was 9.9% above its 200-dMA at the 14 Mar 1563 high. As I wrote a while back, that was about my guess for a short term top and that remains my best guess although it’s still possible the markets could get another 5% higher. Currently, the market internals I track are trending flat to slightly down without enough conviction to indicate where the market is headed.

I saw a discussion on CNBC where an ardent Bull said he was bullish because earnings were at an all-time high. Frankly, that is actually a fact that should cause thoughtful investors to take some money off the table. If earnings are at an all-time high (and they are), then the only way forward is down. Falling earnings (or even stalled earnings growth, will take the markets down.

Action during the last hour of the day, the so called “Smart Money” has been trending down slightly since the recent run-up started in December of 2012, but the market was down sharply in the last hour today.

If this is the long awaited correction, I’d expect a 10% correction assuming we don’t get bad news along the way. That may be a bad assumption given the news from Europe.

MARKET RECAP
Thursday, the S&P 500 finished down 0.8% to 1546 (rounded). VIX was up 10% to 13.99.

NTSM

Thursday, the NTSM analysis remained HOLD at the close.

My numerical system, the Navigate the Stock Market analysis (or NTSM) has been deteriorating. Sentiment is already extremely stretched. The recent rise in the VIX and increased downside Volume has begun to suggest that the NTSM may switch to sell soon. That would confirm my current bearish stance. Frankly, whenever I have chosen to ignore my NTSM analysis and make a “reasoned,” though still somewhat emotional, decision, I have lost money relative to the S&P 500. We’ll have to wait and see what happens this time.

MY INVESTED POSITION

With long-term funds, I remain about 20% invested in stocks as of 5 March, due to my risk tolerance rather than the numerical NTSM analysis. To put it bluntly, I currently have no tolerance for risk. (If I were strictly following the NTSM numbers, I'd still be heavily invested in stocks.) My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html

Wednesday, March 20, 2013

Trucking Keeps on…well, you know

ATA TRUCK TONNAGE UP (ATA, Arlington, VA)
“The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index rose 0.6% in February after increasing 1% in January.... Tonnage has now increased for four straight months, which hasn’t happened since late 2011... Compared with February 2012, the SA index was up a solid 4.2%, just below January’s 4.6% year-over-year gain. Year-to-date, compared with the same period in 2012, the tonnage index is up 4.4%. In 2012, tonnage increased 2.3% from 2011... ATA Chief Economist Bob Costello said. “While I think this is a good sign for the industry and the economy, I’m still concerned that freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns. A little longer term, I think the economy and the industry are poised for a more robust recovery.” Press release at...
http://www.truckline.com/pages/article.aspx?id=1094%2F8e1c7279-ed27-4c03-b189-ceeee26bbb12

Copper may be falling (see yesterday’s blog), but trucking keeps on...well, you know. Speaking of copper, here’s a more technical analysis of recent copper action:

DR. COPPER: NOW TESTING 2009 EXPANSION SUPPORT (Financial Sense - 3/19/2013)

“This morning copper has broken through 3.50 to trade slightly below the cyclical support which has been in place since the economic “recovery” began in 2009. A barometer of global demand, this breach if it holds, has traditionally been a leading indicator for the risk market cycle. This time different?” - Danielle Park. For more discussion see...
http://www.financialsense.com/contributors/danielle-park/dr-copper-now-testing-2009-expansion-support

MARKET RECAP
Wednesday, the S&P 500 finished up 0.7% to 1559 (rounded). VIX was down 12% to 12.67.

NTSM

Wednesday, the NTSM analysis remained HOLD at the close.

MY INVESTED POSITION

Tuesday, March 19, 2013

Dr. Copper, PhD

3-Month Chart from Yahoo Finance at...
http://finance.yahoo.com/q/bc?t=3m&s=CU&l=on&z=l&q=l&c=&ql=1&c=%5EGSPC

Copper is a proxy for the world economy, since it is widely used in manufacturing and construction. It is often called Dr. Copper because (so they say) copper has a PhD in economics. When the price of copper diverges from markets (in this case the S&P 500) there is cause for concern, but the above chart doesn’t really tell the full story.

The following chart shows that copper began diverging from the S&P 500 in August of 2011 and is now down 50% relative to the S&P 500. One would think the S&P 500 must follow at some point.

2-Year Chart from Yahoo Finance at...
http://finance.yahoo.com/q/bc?s=CU&t=2y&l=on&z=l&q=l&c=%5EGSPC

LOOKS LIKE 1929 (CNBC)

“Investors should remain on the sidelines and wait for a market correction as a 4-year rebound comes to an end, Sandy Jadeja, chief market strategist at SignalPro said on Tuesday. Jadeja said the current market cycle showed "extreme similarities" with 1929. Full story at...
http://www.cnbc.com/id/100567928

Mr. Jadeja also cited copper as one of the indicators.

NOW FOR SOMETHING COMPLETELY DIFFERENT

“Deutsche Bank Upgrades U.S. Economic Outlook: ‘This Time Is Different’ Says Economist (The Daily Ticker – Yahoo Finance)
Recent positive economic data –higher retail sales, better-than-expected report on industrial production and a five-year low in the four-week moving average for new jobless claims – are indicative of an economy on an upswing. Deutsche Bank recently upgraded its U.S. economic outlook, raising its Q1 GDP estimate to 3% from 1.5% and its full-year growth projection to 3.5% from 3%.” Full story at
http://finance.yahoo.com/blogs/daily-ticker/deutsche-bank-upgrades-u-economic-outlook-time-different-125607742.html

My cmt: You know I love the “This Time Is Different” quote. Reinhart and Rogoff, authors of the book by the same name, might disagree.

Even if the economy is looking up (and I’m not sure that it warrants the optimistic outlook in the above story) stock market valuations are stretched so the market is not likely to mirror the economy. The Shiller PE is at extreme levels. Even PE’s based on forward operating earnings are likely far too high. The record profits posted by S&P 500 firms cannot continue. If you want to delve into Valuation in detail, read this week’s John Hussman, PhD, Weekly Market Comment for March 18, 2013 at

http://www.hussmanfunds.com/wmc/wmc130318.htm

CYPRUS

To no one’s surprise, the Cyprus parliament voted against the bank-account-tax. The problem for Cyprus is that their economy is tiny compared to the mega-banks that have parked there. Now they need to bail out the banks, but the country can’t fund even a portion of a bailout. Europe: “I’m baaack!”

MARKET RECAP
Tuesday, the S&P 500 finished down 0.2% to 1548 (rounded). VIX was up 8% to 14.39.

NTSM

Tuesday, the NTSM analysis remained HOLD at the close.

MY INVESTED POSITION

Monday, March 18, 2013

Cyprus GDP…Smaller than Vermont

…but Cyprus moved the markets world-wide today with a wealth tax aimed at banking accounts.

CYPRUS TO TAX BANK ACCOUNTS (CNBC)

“... the new proposal would see savers with less than 100,000 euros in their accounts pay a one-time tax of 3 percent (the initial figure was 6.75 percent). Those with deposits from 100,000 to 500,000 euros would pay 10 percent and anyone with over 500,000 euros in their accounts would pay 15 percent.

With an estimated 37 percent of the $68 billion of deposits in Cypriot banks belonging to foreigners, many of whom Russian investors and businesses according to experts, Cypriots are not the only savers that could lose money under the deal.

Vladimir Putin's spokesman quoted the Russian President as saying on Monday morning that a deposit levy would be ‘unfair, unprofessional and dangerous’, Reuters reported.” Full story at…

http://www.cnbc.com/id/100562036

My comment: When a diplomat (and I use the word loosely) says “dangerous”, it is clearly a threat. As Dennis Gartman said on CNBC, “You don’t mess with the Russian Mafia.” Cyprus is surprisingly tied to Russia; they owe Russian banks a lot of money and they have billions from Russian depositors.

This “wealth tax” consists of raiding private bank accounts and taxing (stealing) the money to give to the Government. Bank-runs began the minute this became public draining ATMs of cash. Banks are not expected to reopen until Thursday.

FUSE IS LIT – El-Erian (CNBC)

"Europe lit the fuse of two sticks of dynamite on Saturday. One is very clear," El-Erian said in a “Squawk Box” interview. "By including small depositors they are risking social unrest, political disorder, and an exit from the euro zone." He added that small depositors should be exempt and that's exactly what Cypriot ministers are trying to do ahead of a Tuesday parliamentary vote.

...The other stick of dynamite that's been lit is much more complicated and more uncertain," El-Erian added. "That is a question mark about the sanctity of bank deposits in Europe. And a reminder that Europe has too many objectives and too few instruments." He said he thinks the political system there is "failing Europe."

... As for whether he'd take money out of European banks, he said no... "I think it's a different threat this time. It's less of a liquidity problem and much more that citizens in Europe are losing confidence in the established political order and the political parties." Full story at…

http://www.cnbc.com/id/100563044\

The markets were surprisingly sanguine – down about one-half percent at the close. The Government was back tracking all day and that is probably one reason why. Another point is that Cyprus is so small, it is hard to get too worked up.

MARKET RECAP
Monday, the S&P 500 finished down 0.5% to 1552 (rounded). VIX exploded up 18% to 13.36 on the Cyprus news.

NTSM

Monday, the NTSM analysis remained HOLD at the close.

MY INVESTED POSITION

Friday, March 15, 2013

OMG! February Retail Sales reports were bogus too????

BEHIND THE RETAIL SALES NUMBERS (Lance Roberts – StreetTalk Live,
Re-posted at dShort.com)
“…retail sales numbers for February…came in stronger than expected in both the headline print (+1.1%, on expectations of a +0.5% rise), the Ex-Autos (+1.0%, Exp. 0.5%), and the Ex-autos and gas (0.4%, Exp. 0.2%). While this is certainly optimistic news that the consumer is "out there spending," which is crucially important for an economy that is 70% based on consumption, it doesn't really tell us much about where consumers are actually spending money or the trend of data overall.

“While the headline seasonally adjusted number showed a surge in retail sales in February - the actual data showed a decline."

My cmt: That is again due to seasonally adjusted data. Lance suggests in his analysis that non-seasonally adjusted (NSA) data is a better metric if it is smoothed with a 12-month moving average. He continued:

"When digging into the retail sales numbers we find that sales of gasoline jumped by 5% and food and beverages rose by 0.8%. These two items made up roughly half of the entire increase in February's retail sales. This is critical because individuals weren't buying more gallons of gasoline, they were paying more for the same amount. The same goes with food and beverages. This means there is less money available for other discretionary, leisure and luxury items. Not surprisingly, there were declines in precisely those areas including furniture, electronics and appliances, sporting goods and music stores.

The next chart utilizes the smoothed NSA retail sales data to look at the annual change in retail sales.

Chart from http://advisorperspectives.com/dshort/charts/index.html?guest/2013/LR-130314-Fig-3.gif (Originally posted at StreetTalklive.com)

“Despite commentary to the contrary, the decline in incomes from higher taxes, stagnant wage growth and rising costs of living is impacting the average family's ability to maintain their current standard of living. Of course, this is also why the personal savings rate has plunged to below 3%, consumer debt levels, ex-mortgage debt, are on the rise and retirement age individuals are still actively employed. This isn't the backdrop that leads to stronger, organic, economic growth in the future.” – Lance Roberts, streettalklive.com

Full story at http://advisorperspectives.com/dshort/guest/Lance-Roberts-130314-Retail-Sales-Analysis.php

RECESSION MUSINGS

I am currently reading “The Signal and the Noise” by Nate Silver. It is a book about predictions. He spent some time reviewing the financial crisis and the associated, mostly bad, predictions. He wrote, “In 2007, economists for the Wall Street Journal forecasting panel predicted only a 38 percent likelihood of recession over the next year. This was remarkable because the data would later reveal, the economy was already in recession at the time.”

As of today, investors are buying cyclical stocks at a rate that suggests no chance of recession in the next quarter or two.

MARKET RECAP
Friday, the S&P 500 finished down 0.2% to 1561 (rounded). VIX was almost unchanged to 11.31.

Volume was high today due to the expiration of options. Volume was so high I didn’t believe my usual source – briefing.com. I went to 2 other sites and they were all over the place. I just picked the one in the middle.

NTSM

Friday, the NTSM analysis remained HOLD at the close.

Considering all of the bullishness around, and the long advance, I am a little surprised to see the NTMS numbers HOLD rather than buy. The underlying numbers are slowing down. All of the bullishness is not reflected in my analysis.

I got mostly out of the market on 5 March at 1525 on the S&P 500. It is now 1561 so I have given up 2% in gains by being out. Not much so far and I think the risk reward situation favors limiting risk.

MY INVESTED POSITION

Thursday, March 14, 2013

Bull, Bear, Bull, Bear

RETAIL INVESTORS GET BULLISH (CNBC)
"So far this year – you may find this number hard to believe – but there have been $12 billion in net buys by our client base," Tomczyk [CEO of TD Ameritrade] said on CNBC's "Fast Money."…While there has been no "great rotation" from bonds into equities, more fund flows into stocks could be ahead, he added." Full story at...
http://www.cnbc.com/id/100547467

RALLY RUNNING OUT OF STEAM (CNBC)
“The rally in the S&P 500 could be running out of steam, StockMonster's Guy Adami said Tuesday...Adami noted that the market reacted predictably after the latest jobs report, followed by an expected selloff…’I think we're dangerously close now to the highs for the year,’ he said." Full story at...
http://www.cnbc.com/id/100547443

THE BEAR IS NOW A BULL (Housing Wire)

“However, Russell [Richard Russell of Dow Theory Letters] is now recommending that investors should buy stocks via the Dow Jones Industrial Average…’Yes, I know that this market is uncorrected during its long rise from the 2009 low, and I know that there are risks in buying an uncorrected advance that is becoming uncomfortably long in the tooth, but my suggestion is that my subscribers should take a chance (after all, Columbus took a chance) and take a position in the DIAs.’” From…
http://www.housingwire.com/fastnews/2013/03/12/richard-russell-turns-bullish

A BEAR IS COMING (CNBC)

“A long term bear market is around the corner and will last until 2018, with the Dow losing up to 30 percent of its current value, Kerry Balenthiran, author of "The 17.6 Years Stock Market Cycle", told CNBC. "My research identified long term 17.6 year secular bull and bear markets. We're in a long term bear market...this bear market will continue until 2018 with the Dow at around 10,000," Balenthiran said. He added that the rally currently taking place would continue for at least the next three months, but said stocks would start falling in October to November.”
Full story at…
http://www.cnbc.com/id/100552025

MARKET RECAP
Thursday, the S&P 500 finished up 0.6% to 1563 (rounded). VIX fell about 4.5% to 11.30.

NTSM

Thursday, the NTSM analysis remained HOLD at the close.

The S&P 500 is 9.9% above its 200-day moving average as of Thursday’s close.

I had guessed that it would turn down when it reached 9.5% above the 200dMA. That guess has gone by the wayside as sentiment has dropped quickly over the last 2-weeks. I still think the top will be signaled by a statistically significant up-day, typically more than a 1% move upward. I’ll reset shorts when that happens, but only if the sentiment has climbed higher.

MY INVESTED POSITION