Highs Are In for the Year

BANK OF AMERICA – WE’VE SEEN THE HIGHS FOR THE YEAR (CNBC)
"We've gone from being out-of-consensus bulls from the end of last year to out-of-consensus bears by the middle of this year, without having changed our outlook on the market at all," Subramanian said Wednesday at the firm's second-half outlook media briefing...”

“…the more likely case is that the market has seen its high point for the year and will drift around for the next six months…”  Full story at…

http://www.cnbc.com/id/100810961

TAPERING QE BY YEAR END: INTERVIEW (MarketWatch)

Interview with Gary Stern, former President of the Minneapolis Federal Reserve
MarketWatch: What is your assessment of the economy and do you think the Fed should start to taper?
Stern: I think the economy has picked up a bit of momentum. If you think about the last 12 months, I think the preponderance of surprises have been on the positive side. They haven’t been huge, but they’ve been positive...
…As far as the timing of the tapering, I personally think this would not be a bad time to start.  But… I would not be surprised if the Fed delayed any tapering for a while here.
MarketWatch: …most economists think there will be a reduction in the pace of asset purchases by the end of the year. It seems you agree?
Stern: That is a good bet as long as the economy continues on its current course or even picks up a bit more from here.”  Interview at…
http://www.marketwatch.com/story/former-fed-president-talks-qe3-tapering-2013-06-11

SHADOW BANKING IN CHINA – A THREAT TO  WORLD ECONOMIES (Reuters)

“‘China's unregulated shadow banking sector poses an increasing risk to the country's financial stability that could spread to other countries,’ credit rating agency Fitch said on Monday... The country was already seeing defaults in trust and wealth management products that could be an early sign of trouble.
‘Stress will appear in the weakest parts of the financial sector, which tend to be non-bank financial institutions on the fringe of the system - and gradually work its way inward,’ she predicted…The foreign owners of stakes in Chinese banks already saw big writedowns on those stakes in the 2008 financial crisis and this could happen again...” Story at…
http://www.reuters.com/article/2013/06/10/us-china-lending-idUSBRE9590UN20130610?feedType=RSS&feedName=businessNews

MARKET RECAP
Wednesday, the S&P 500 closed down about 0.8% to 1613 (rounded).

VIX was up about 9% to 18.59.

MARKET INTERNALS

Still look crummy, but not crummy enough to suggest a turn-around.

NTSM

Wednesday, the overall NTSM analysis was SELL at the close.   That’s not a surprise; NTSM has had several SELL signals going back about a month.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…(although that probably looks pretty lame by now.)
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)

I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.