GDP...Mixed Results on Jobs...FED Downgrades the Economy

GDP (CNN/Money)

“Gross domestic product -- the broadest measure of economic activity -- rose at a 1.7% annual rate in April through June, slightly faster than the 1.1% rate in the first quarter, the Bureau of Economic Analysis reported Wednesday…"With this report, the story of modest growth just continues on," said Jason Schenker, president and chief economist of Prestige Economics.”  Story at… 
http://money.cnn.com/2013/07/31/news/economy/gdp-report/index.html?iid=HP_LN

ZeroHedge also noted that Q1 of 2013 (note typo in the above chart) was revised down from 1.8% to 1.1% in today’s release.  That was the biggest miss in 27-months.  Story at…

http://www.zerohedge.com/news/2013-07-31/revised-q2-gdp-prints-18-higher-expected-prior-revised-lower

TRIM TABS JOBS  “DOWN SHARPLY” (dShort.com)

“TrimTabs Investment Research estimates that the U.S. economy added 23,000 jobs in July, down sharply from 135,000 jobs in May and 182,000 jobs in June…TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than the initial estimates from the Bureau of Labor Statistics.”
http://advisorperspectives.com/dshort/commentaries/Anticipating-the-July-2013-Employment-Data.php

ADP JOBS NUMBERS AT 200K…10-times higher than Trim Tabs.

Interesting that there is such a difference.  The important number will be the Government’s Job report Friday.

All in all…mixed and conflicting data continues…

In the end, only one thing matters: Corporate earnings.

EARNINGS ANALYSIS (CNBC)

“As corporate earnings season passes the halfway point, results have been good enough but not particularly good, signaling that a hoped-for strong surge in the second half could be elusive.  In fact, were it not for a robust financial sector, profit on the S&P 500 would be tracking negative 1.6 percent, according to Bank of America Merrill Lynch consensus estimates.”  Full story at…
http://www.cnbc.com/id/100924043

TAPERING WILL BEGIN IN SEPTEMBER – ART CASHIN (CNBC)

“Art Cashin of UBS said Tuesday that a little-noticed announcement Monday lends further credence to the belief that the Federal Reserve will begin tapering in September…‘Last night the Treasury announced that their borrowing will be slashed by 25 to 30 percent for the balance of the year," he told CNBC. ‘So the Fed has to taper to not be disruptive. There's not enough supply out there, so they've got to cut back.’”  Video at…
http://www.cnbc.com/id/100925849

Hmmm…Maybe, maybe not.

FED DOWNGRADES ECONOMIC GROWTH TO MODEST (AP)

“The Federal Reserve said Wednesday that the U.S. economy is growing only modestly, a downgrade from its June assessment. The Fed expects growth will pick up in the second half of the year, but the more cautious message may be a signal that it's not ready to slow its bond purchases soon.  In a statement after a two-day policy meeting, the Fed says it will keep buying $85 billion a month in bonds to help lower long-term interest rates.” Story at Yahoo Finance…
http://finance.yahoo.com/news/fed-downgrades-us-economic-growth-modest-180217007.html

MARKET REPORT
Wednesday, the S&P 500 made an intra-day, all-time high around 3PM, but then fell more than 10 pts in the final hour and ended unchanged at 1686 (rounded) due to the Fed announcement. 

VIX was up about 0.5% to 13.45. 

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE ended just below 50%.  Usually a value below 50% signals additional trouble for the markets.

The change in the daily spread of new-highs and new-lows has been improving, though it is still pointing down.  Market internals are still trending down so internals suggests further down for the S&P 500.

NTSM

Wednesday, the overall NTSM analysis was HOLD at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Hussman - 40% Crash Likely (Maybe worse)

HUSSMAN
“The danger of mispricing risk is that there is no way out without investors taking losses. And the longer the process continues, the bigger those losses could be. That's why the Fed should start tapering this summer before financial market distortions become even more damaging.” - Martin Feldstein, President emeritus, National Bureau of Economic Research, July 1, 2013

“… I don't expect this cycle to be completed with a 20% loss, or a 25% loss, but instead a loss in the 40-55% range…A 40% market loss is the central expectation. Even run-of-the-mill bear markets average a loss of about 32%, while run-of-the-mill cyclical bear markets in a secular bear context average a loss closer to 38%...”

“…we have one of the most overvalued, overbought, overbullish equity markets in history, but one where investors are under the illusion that stocks are appropriately priced, because they are being sold a valuation benchmark (forward operating earnings) that reflects profit margins 70% above historical norms – a direct result of unsustainably large deficits in combined government and household savings.”

– John Hussman, PhD, Hussman Weekly Commentary for 29 July 2013.  Read the commentary and analysis at Hussman Funds at…
http://www.hussmanfunds.com/

Of course John Hussman has been warning of this potential for more than a year. Now he is being joined by the “Elliott Wavers” who are calling for a top as soon as August.  I can’t say too much because the NTSM system has been negative on the markets since March, and the market is up almost about 7% since then.

80% OF ADULTS: NEAR POVERTY; RELY ON WELFARE; OR UNEMPLOYED (ZeroHedge)

“Despite consumer confidence at a six-year high, the latest AP survey of the real America shows a stunning four out of five U.S. adults struggle with joblessness, are near poverty, or rely on welfare for at least parts of their lives amid signs of deteriorating economic security and an elusive American dream. Hardship is particularly on the rise among whites…” Story at
http://www.zerohedge.com/news/2013-07-28/80-us-adults-are-near-poverty-rely-welfare-or-are-unemployed

I know ZeroHedge tends to report the negative news, but the above is a stunning statistic reported by the AP.  This story was also prominent on the MSN Home Page Monday in the AM, but MSN misquoted the statistics in its headline (claiming 80% of the population was on welfare) and I couldn’t find the article anywhere on MSN Monday afternoon.

QUESTION: If US income nationwide has fallen 5% in the last 5-years and the rest of the world is in trouble too, how can the economy avoid recession?  The short answer is…only if a lot of people get hired.  See below chart:

MARKET REPORT
Tuesday, the S&P 500 was up 1pt to 1686 (rounded). 
VIX was unchanged at 13.59. 

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE bumped up to 51%.  Usually a value below 50% signals additional trouble for the markets.

There were 114-new-highs today (Monday) an improvement over the previous day, but 6-days ago there were over 300-new-highs.  Market internals are still trending down so internals suggests further down for the S&P 500.

NTSM

Tuesday, the overall NTSM analysis was HOLD at the close. 

SENTIMENT – NOW VERY NEGATIVE

Sentiment was 70%-bulls at the close Monday and the 5-dMA of percent-bulls was 66% at Monday’s close (based on Guggenheim/Rydex funds I track).  Both of those numbers are extremely bullish and that is a negative for the market.  The topping process continues!

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Revenues Decline; Earnings Growth-Rate Weak

FACTSET EARNINGS INSIGHT 26 July 2013 (FACTSET)
“At Mid-Point, Companies Beating Estimates By 2nd Smallest Margin since 2009
...there is a good chance that the Q2 2013 quarter will finish with the third lowest earnings growth rate recorded by the index in the past four years, trailing only the Q3 2009 (-15.3%) quarter and the Q3 2012 quarter (-1.5%)...

With 53% of the companies in the S&P 500 reporting actual results, the percentage of companies reporting earnings above estimates (73%) is in line with the four-year average, while the percentage of companies reporting revenues above estimates (54%) is below the four-year average.”  Report available from FactSet at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_7.26.13

FED, GDP AND JOBS – BUSY WEEK AHEAD (CNBC)

“About a fifth of the S&P 500 companies report earnings in the coming week, and it's a first look at big oil, with BP, Exxon and Chevron all reporting. Then there are two major data releases — the Friday jobs report, always important, and second-quarter GDP on Wednesday.

Many economists expect second-quarter GDP to come in at less than 1 percent. But the big deal may be the government's special release of revisions going all the way back to 1929, which could make the economy look slightly better, at least on paper.” Story at….

http://www.cnbc.com/id/100917867

CONSUMER SENTIMENT (MarketWatch)

“Consumer sentiment in July rose to 85.1, marking the highest level in six years, according to the final University of Michigan/Thomson Reuters data released Friday…‘The July survey suggests a growing resilience among consumers that will enable them to more easily withstand the cross-current inevitable in a slow growth economy,’ said Richard Curtin, chief economist of the surveys of consumers.”  Story at…
http://www.marketwatch.com/story/consumer-sentiment-reaches-six-year-high-2013-07-26

MARKET REPORT
Monday, the S&P 500 was down 0.4% to 1685 (rounded). 

VIX was up 6% to 13.50 (rounded). 

VIX will need to rise a lot more before a downturn is confirmed by the VIX.  If anything, options players are quite complacent.

On 17 May the S&P 500 was 1667.  Today the index closed at 1685.  The index has only gained 1% in more than 2-months.  It’s just another indication of topping process underway.  When topping is occurring, the chart looks like a mountain-range, rather than a pyramid. In 2011 this went on for about 3-months before the correction got serious in late July.  No gurantees though - the index could go flat for some time and then simply begin moving up again.

MARKET INTERNALS (NYSE DATA)

Breadth (%-advancing) was negative with only 30% of stocks advancing Monday.  The 10-day moving average of stocks advancing on the NYSE dropped to 49%.  Usually a value below 50% signals additional trouble for the markets.

There were 80-new-highs today (Monday) down from 98 Friday so new-highs continue to decline; 5-days ago there were over 300-new-highs.  Market internals suggest further down for the S&P 500.

NTSM

Monday, the overall NTSM analysis was HOLD at the close. 

Sentiment was high Friday as fully 66% of traders in the Guggenheim/Rydex funds I track were long.  That pushed the 5-day moving average up to 62%-bulls.  I would get a sell signal for this one indicator at 63%-bulls in the NTSM system.  Sentiment is one of the weaker indicators because it is not accurate regarding the timing of buy-sell signals.  Because of this Sentiment tends to be a supporting player and it takes 1 or 2 more indicators to send the system to sell.

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Inflows Into Stock Funds – Part of the Topping Process

LONG TERM US EQUITY FUNDS SEE INFLOWS (ICI)
About 7-billion dollars flowed into mutual funds during the 2-week period ending 17 July.  This is just another indication of the topping process.  Previously, money was being withdrawn.  The Mutual fund players have had a history of putting money into the long-term US equity funds at or near the top.  Press release at…
http://www.ici.org/research/stats/flows/flows_07_24_13

THE MARKET’S JUST TIRED – PRO (CNBC)

”Stocks in the near-term don’t offer enough potential gains to be buying, Stephen Weiss of Short Hills Capital says.”  Video at…
http://video.cnbc.com/gallery/?video=3000186087&__source=yahoo%7Cheadline%7Cquote%7Cvideo%7C&par=yahoo

HUSSMAN TWEETS (Mike Shedlock)

“Institutions have never dumped more stock onto retail investors as they have in the past 4 weeks.”  Short post at…
http://globaleconomicanalysis.blogspot.com/

I have seen a number of posts about “distribution” days recently.  If it is true, then the big boys want the poor saps to take stock off their hands.  That is not a good sign.

MARKET REPORT
Friday, the S&P 500 was up 0.1% to 1692 (rounded). 

VIX was down 2% to 12.72. 

Repeating…VIX still is not confirming a down-turn.  Options players aren’t concerned.

MARKET INTERNALS (NYSE DATA)

Breadth was negative with only 47% of stocks advancing today on a slightly up day.  The S&P 500 chart has been relatively flat over the last 5-days while breadth has been steadily declining, so there is definitely divergence.  This simply means that the number of stocks advancing has decreased over that time frame, just not ones that influence the S&P 500 index. 

There were less than 100 new-highs today so new-highs continue to decline; 4-days ago there were over 300-new-highs.  Today, there were fewer new-lows so the spread between new-highs and new-lows improved a little on the day.  Still, on the whole, market internals suggest further down for the S&P 500.

NTSM

Friday, the overall NTSM analysis remained HOLD at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Jobless Claims Rise UP…Truck Tonnage UP…Durable Goods Orders UP

JOBLESS CLAIMS RISE (Bloomberg)
"Jobless claims rose by 7,000 to 343,000 in the week ended July 20 from a revised 336,000 the prior period, Labor Department figures showed today in Washington… “The trend in claims is fairly stable,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who projected an increase in claims. “We’re sustaining the improvement we saw from late last year, but not necessarily gaining a great deal of momentum on top of that.”
http://www.bloomberg.com/news/2013-07-25/jobless-claims-in-u-s-increased-by-7-000-to-343-000-last-week.html

ATA TRUCK TONNAGE INDEX HIGHER (ATA)

"The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index edged 0.1% higher in June after surging 2.1% in May. (May’s increase was slightly lower than the 2.3% gain ATA reported on June 18, 2013.)  
… Compared with June 2012, the SA index surged 5.9%, which is robust, although below May’s 6.5% year-over-year gain. Year-to-date, compared with the same period in 2012, the tonnage index is up 4.7%.
…“The fact that tonnage didn’t fall back after the 2.1% surge in May is quite remarkable,” ATA Chief Economist Bob Costello said. “While housing starts were down in June, tonnage was buoyed by other areas like auto production which was very strong in June and durable-goods output, which increased 0.5% during the month according to the Federal Reserve.” Press release from ATA at…
http://www.truckline.com/article.aspx?uid=ac7c219e-694c-4bb8-a23e-d70307577c08

Finally, some good news!  Truck tonnage has increased suggesting no recession.

DURABLE GOODS ORDERS BEATS FORECAST…BUT NOT IF YOU EXCLUDE TRANSPORTATION  (Doug Short) 

Analysis at Advisor perspectives…
http://advisorperspectives.com/dshort/updates/Durable-Goods-Orders.php

$1 IN MARKET IN 2000, TODAY WOULD BE…$1 (CNBC)

“Investors have had to navigate a market that for the last 13 years has delivered no real returns, according to Morgan Stanley's Greg Fleming…Using some basic math—specifically, the government's inflation calculator—the current value would have to be closer to 2,000 to have grown in lockstep with inflation.”  Story at CNBC at…
http://www.cnbc.com/id/100893385

MARKET REPORT
Thursday, the S&P 500 was up 0.3% to 1690 (rounded). 

VIX was down 2% to 12.97. 

VIX still is not confirming a down-turn.  Options players aren’t concerned.

MARKET INTERNALS

Market internals don’t look good.  Breadth was good on the day, but longer term averages are turning down.

There were only 152 new-highs today (on an up day); 3-days ago there were over 300-new-highs.  The spread between new-highs and new-lows has been accelerating to the downside each day since the high 4-days ago. Conclusion: Market internals suggest further down for the S&P 500, and therefore, the markets in general.

VOLUME

I noted yesterday that the volume at the recent high was 15% below the month’s average surrounded by good volume on either side of the high.  Frequently the volume is high at a top as shorts cover and the buy-at-any-cost mentality pushes the market to a frothy new-high.  Those days are “statistically significant” in the NTSM system.  That was definitely not the case at the recent high.

Another way to make a high is simply to run out of buyers.  I found a high 2-years ago where volume in the S&P 500 data was similar to the recent high.  The high on 29 April 11 was accompanied by volume 10% below the monthly average bookended by good volume for several days before and after.  That was the beginning of a 19% correction.  It may be just coincidence though, so no need to make too much from it.  The point is that the markets don’t require a high-volume day to start a rather significant correction.  

NTSM

Thursday, the overall NTSM analysis remained HOLD at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Earnings Stink…Government Shutdown…China Economy Worse

EARNINGS STINK (Jeff Reeves)
“It is rare when I come down on the same side as the black helicopter crowd. Assertions that unemployment data are falsified or that America’s gold reserves are a fiction make me roll my eyes every time.  However, it’s hard not to agree with some of the doubters on one important issue lately: corporate earnings.  Earnings stink, plain and simple… and the current trajectory of 1% sales decline on average would mark the first negative growth for revenue since third quarter 2009.”  
Story from MarketWatch at…   
http://www.marketwatch.com/story/ignore-the-hype-earnings-stink-2013-07-24?dist=lcountdown

SENATOR: REPUBLICANS WILL SHUT DOWN GOVERNMENT TO HALT OBAMACARE (Wall Street Cheat Sheet)

“If the president has decided he won’t enforce his law as it is written, then Congress should not fund any further implementation of it at all,” he [Senator Mike Lee] added, referring to the administration’s decision to “exempt businesses from the onerous burdens of his law, while forcing American families and individuals into ObamaCare’s unsound and unstable system…
…a dozen Senate Republicans…are willing to block a continuing resolution to fund the government beyond September 1, which of course, includes funding for Obamacare.” Story at…
http://wallstcheatsheet.com/stocks/senator-republicans-will-shut-down-government-to-halt-obamacare.html/4/

That may worry the markets…Why? I’m not sure.

CHINA WORSE (MarketWatch)

“China's manufacturing-sector activity is slowing further in July, with new factory orders deteriorating at a faster pace, according to preliminary data out Wednesday from HSBC and Markit. The so-called "flash" version of HSBC's Chinese manufacturing Purchasing Managers' Index dropped to 47.7, an 11-month low and down from a final result of 48.2 for June, with any reading below 50 indicating contraction.”  Story at…
http://www.marketwatch.com/story/china-manufacturing-gauge-hits-11-month-low-hsbc-2013-07-23?link=MW_story_latest_news

MARKET REPORT
Wednesday, the S&P 500 was down 0.4% to 1686 (rounded). 

VIX was  up 4% to 13.18. 

I’ve been following the market internals for an indication of a possible downturn in the markets.  Breadth has turned down over the last 3-sessions.  New-hi/new-low data has also turned down over the last 4-sessions.  Internals are more informative when they diverge from the market so this isn’t a great confirmation. (The markets were down too for 2 of the days.)  Still, the trend is down and it shouldn’t take long to see if the internals will get more negative.  In short, internals have turned down, but not steeply

VIX is not confirming a down-turn.  Options players aren’t very concerned.

Here’s a curious note on volume.  At the recent new-high (2-days ago) the volume on the NYSE was down 15% from its 20-dMA.  For each of the 2 days before the recent new-high, volume was at the 20-day average.  For the last 2-days, volume was at the 20-day average.  Do the pros know that 1696, 2-days ago, really was the top?  Perhaps they do; the volume suggests that many others were cautious at that level, but looking at past tops I didn’t see too much history to support the theory that low-volume is associated with a top.  (I only have the data going back 2-years on this and I don’t have the energy to track it down at this point.)

Also 2-days ago, the daily sentiment was 50%. In other words, half the traders were betting long and half were betting short in the Guggenheim/Rydex funds I track.  Today, after 2-down days, sentiment popped up to 69%.  More than twice as many traders are betting long at the close Wednesday.  That means the dip-buyers are moving in.  That is quite typical of topping action.  Bullish-sentiment usually gets more extreme after the top.

In the end, none of this means that we topped-out and returned to the correction 2-days ago.  It’s boring and repetitive…but we’ll just have to wait and see.

NTSM

Wednesday, the overall NTSM analysis switched to HOLD at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

Richmond FED Manufacturing Declines

RICHMOND FED MANUFACTURING – SURPRISING DECLINE (Doug Short)
“Today the manufacturing composite dropped back into contraction with a surprising 18 point decline to -11. Investing.com had forecast continuing expansion at 7.”
Story at Advisor Perspectives at http://advisorperspectives.com/dshort/commentaries/Richmond-Fed-Manufacturing.php

The Fed report Stated: “Shipments, new orders, backlogs, and capacity utilization

fell this month.”  This tends to be a volatile series so further data is required.

MORE CITY BANKRUPTCIES COMING (Mish Shedlock)

“There is absolutely no way Chicago, Oakland, Baltimore, Philadelphia, LA, Houston, and numerous other cities can meet pension obligations without a major restructuring of promises.

Given that public unions seldom if ever agree on even the smallest of pension concessions, expect many of those haircuts to happen in bankruptcy court...
…The bankruptcies in California cities and Detroit provide a backdrop of what's about to happen. In the meantime, expect an avalanche of city debt downgrades.”  For the full story see Global Economic Advisors at…
http://globaleconomicanalysis.blogspot.com/2013/07/moodys-downgrades-chicago-debt-citing.html

CHINA MANEUVERS TO TAKE AWAY US RESERVE CURRENCY STATUS

“It should go without saying that China and Russia have designs to end the U.S. Dollar hegemony and debtism free ride. This is fundamental to understand and will be a game changer. The impacts on the standard of living of these players will be profound and especially negative for the U.S….
…China has already advanced the Yuan as a principal exchange currency by incorporating a series of deal with other countries. Such arrangements are hardly mentioned by U.S. financial media, but they are going on constantly. So far, the People’s Bank of China (PBOC) has signed nearly 2 trillion yuan worth of currency-swap deals with 20 countries and regions, including Hong Kong.” Commentary at…
http://winteractionables.com/?p=4676

No good news today!

MARKET REPORT
Tuesday, the S&P 500 was down 0.2% to 1692 (rounded). 

VIX was up 4% to 12.82.  

Again, today, Tuesday, there have only been 4-down days in the past month (including today) and that is overly bullish and suggests some retracement via a correction when combined with other indicators.

I said yesterday that there were signs in the market internals that indicate a possible downturn in the markets.  Today it seems the market internals have stalled, but it may still be premature to say they are confirming a move either way.  Actually, advancers outpaced decliners today by about 400 so this suggests an up day tomorrow rather than a correction start.

In the past, I have written that the S&P 500 is 11% above its 200-day moving average and that is problematic for the markets.  That is a good number to watch, but it can get a lot more advanced, so by itself, it gives guidance, but not tradable guidance.  The important thing is to watch a larger series of indicators to get a more complete picture of the market.  At the present time, I am bearish based on an ensemble of indicators.

NTSM

Tuesday, the overall NTSM analysis remained SELL at the close.  (That stance has been wrong recently.  Will it be wrong again?)

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

80% of Companies Issue Negative EPS Guidance…so far

FACTSET EARNINGS INSIGHT (JULY 19)
“With 21% of the companies in the S&P 500 reporting actual results, the percentage of companies reporting earnings above estimates (72%) is in line with the four-year average, while the percentage of companies reporting revenues above estimates (50%) is below the four-year average.”

“Earnings Growth Rebound Still Projected for 2nd Half 2013, But Little Revenue Growth…At this early stage of the earnings season, 17 companies in the index that have issued [earnings per share] EPS guidance for the third quarter. Fourteen companies have issued negative EPS guidance, while three companies have issued positive EPS guidance.”

Report available from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_7.19.13

MCDONALDS EARNINGS BELOW EXPECTATIONS

http://www.cnbc.com/id/100899153

EARNINGS – THIS IS THE WEEK THAT IS…

"Looking at the rest of the week ahead, it will be a bumper one for U.S. earnings as around 160 S&P 500 constituents are scheduled to report," wrote Deutsche Bank analyst Jim Reid, in a market report. "With U.S. banks now largely out of the way, we should get a clearer picture of how corporate America is performing."  Story at…
http://money.cnn.com/2013/07/22/investing/stocks-markets/index.html?iid=HP_LN

EXISTING HOME SALES FALL 1.2% (CNBC)

“US sales of previously occupied homes dipped in June to 5.08 million, but remain near 3 1/2-year high. Economists polled by Reuters were expecting existing home sales to rise to a seasonally adjusted annual rate of 5.26 million in June from 5.18 million the month before.” Story at…
http://www.cnbc.com/id/100899588

Jeepers…there must some good news around…Yes there is; the S&P 500 was up!

MARKET REPORT
Monday, the S&P 500 was up 0.2% to 1680 (rounded). 

VIX was down 2% to 12.29.  

As I wrote Friday, the Sell signal in the NTSM system is based on bullish action in the market; high sentiment values; “percent-above-the 200dMA”; and failure to decisively take out the prior high.  Except for that last one, the others are all sentiment related – too much bullishness.  It is important to remember that sometimes excessive bullishness is the correct market call.  That is true after a significant bottom.  It is hard to know if the market will shrug-off the current high sentiment and continue up.  I don’t think so.  I looked back as far as 2009: when conditions were as bullish as today (in sentiment, bullish market action, high %-above the 200dMA) a top occurred shortly thereafter.  The tops were not necessarily “major” tops though, so this suggests another correction to me.  Perhaps the S&P 500 will finally have that 10-20% correction that is overdue.  It is not unusual for the extreme bullishness to last for several days before topping.  Market internals can give us a clue.

I do see signs, today, of a turnaround in market internals that would indicate a turn down in the general markets is likely to follow.  Whether this trend will continue remains to be seen. 

One indicator not confirming a downturn is the VIX.  It is neutral in my system and has fallen to near 12.  VIX was around 10 before the 2008-09 crash.  If the options boys expected a correction VIX should be rising.   

NTSM

Monday, the overall NTSM analysis remained SELL at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.

 

More SELL Signals (Including NTSM)

THE TOP IS IN (Market Watch)
…Ho, hum…how many have called the top (and been wrong)?  Here’s the teaser and link:
“Raymond James Chief Investment Strategist Jeffrey Saut…has been targeting July 19 as ‘intermediate top’ for the market for two and a half months. He cited quantitative timing and technical models, and said he’s been raising cash.
Saut’s looking for a correction of 10% to 12%.”  Story at…
http://blogs.marketwatch.com/thetell/2013/07/19/jeffrey-saut-has-been-targeting-july-19-as-intermediate-top/

ANOTHER SELL CALL (Mark Hulbert, Marketwatch)

“…the “High Low Logic Index,” created by Norm Fosback in 1979, then the president of the Institute for Econometric Research, and currently editor of Fosback’s Fund Forecaster” …is now in “sell mode”.  Story at…
http://www.marketwatch.com/story/sell-signal-from-key-market-indicator-2013-07-17

NO, PART TIME JOBS AREN’T ONLY ONES BEING CREATED

“The big drop in full-time workers and the large increase in part-timers in June is almost surely statistical noise, with absolutely no meaning at all…the trend toward more part-time employment is nothing new. In 1968, just 13% of workers worked less than 35 hours (the government’s definition of part time). By 1980, that had risen to 17%.” Commentary at...
http://www.marketwatch.com/story/no-part-time-jobs-arent-only-ones-being-created-2013-07-19?dist=beforebell

FED PONDERS PART-TIME SHIFT

“…some saying President Barack Obama’s 2010 health-care law exacerbates the trend…It’s hard to make any judgment,” Bernanke said when Stutzman asked if the Patient Protection and Affordable Care Act’s mandates are slowing the economy. Bernanke said that it has been cited in the economic outlook survey known as the Beige Book, which the Federal Open Market Committee considers in assessing the economy.

“One thing that we hear in the commentary that we get at the FOMC is that some employers are hiring part-time in order to avoid the mandate,” Bernanke said. He added that “the very high level of part-time employment has been around since the beginning of the recovery, and we don’t fully understand it.”   Story at…

http://www.bloomberg.com/news/2013-07-19/fed-ponders-part-time-shift-as-obamacare-role-questioned.html

FED: WE MADE GRANDMA INVEST IN JUNK BONDS (Market Watch)

“The risky hunt for investment income in a low-interest-rate world has been a preoccupation of retirees for almost five years now—ever since the Federal Reserve slashed interest rates in a bid to revive the economy. So there’s been at least a small measure of satisfaction this week in seeing the Fed acknowledge its role in putting investors in that bind. In a Monetary Policy Report, published Wednesday in conjunction with Fed Chairman Ben Bernanke’s testimony in Congress, the Fed acknowledged that while the extended period of low interest rates had done some economic good, it has also pushed some investors “to ‘reach for yield,’ through excessive leverage, duration risk, credit risk, or other forms of risk-taking.”  Full story see…
http://blogs.marketwatch.com/encore/2013/07/18/fed-notes-excessive-investor-risk-taking/?

MARKET REPORT
Friday, the S&P 500 was up 2pts to 1692 (rounded). 

VIX was down about 7% to 12.84.  

Closing up today (Friday), the S&P 500 again is up 9 out of the last 10-days and it is up 16-days out of the last 20.  Combined with elevated sentiment values and a high percent-above-the 200-day moving average, a correction is suggested.  (The S&P 500 is 10.9% above its 200-dMA.  The S&P 500 peaked in May when the index was 12.7% above the 200-dMA.)  Further…

The S&P 500 has closed above its previous (21 May 2013-1669) top 7-times, but as of today’s close, the index is only 1.3% above the prior top; thus, the top has not been decisively pierced.  Together it’s just more evidence that a correction may be imminent…BUT…the US stock market seems to be the world’s safe haven, so perhaps it will again ignore technical analysis and continue upward.

NTSM

Friday, the overall NTSM analysis switched to SELL at the close. 

MY INVESTED POSITION

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.