Chicago PMI

CHICAGO PMI (Business Insider)
Chicago PMI rose to 53.0, meeting expectations.  July's reading was 52.3.  It's the first back-to-back gain in two years.”  Story at…
http://www.businessinsider.com/august-2013-chicago-pmi-2013-8

Regular readers of this blog know that I post excerpts from John Hussman regularly.  Hussman has been negative on the stock market for more than a year.  Here’s a piece from Business Insider on the subject.

THE STOCK MARKET WILL PROBABLY CRASH

I will go out on a limb here and say that I think there's a good chance that John Hussman will ultimately be proven right.  Even if the market doesn't actually crash, I think it's highly likely that stock returns will be lousy for the next ten years.
If you want to feel comfortable and happy, go ahead and ridicule John Hussman with everyone else.  If you want to prepare yourself for what seems like a likely possible stock-market future, however, read on...
HUSSMAN – ‘Frankly, I wonder whether any amount of arm-waving will incline investors to actually examine their risk exposures here, much less consider the prospect of a 40%+ decline in the S&P 500 Index that would be required simply to bring stocks to historically run-of-the-mill valuations. But at a time when our estimates of prospective risk are surging, I would be remiss not to observe that fact.’
…You have been warned!”   Full story at
http://www.businessinsider.com/hussman-the-stock-market-will-probably-crash-2013-8

CASHIN: COMMENTS FROM FED’S LACKER “HIT ME LIKE A 2-BY-4” (CNBC)
“The important event that created anxiety in markets Thursday—which many may have missed—was comments from Richmond Fed President Jeffrey Lacker." …including Lacker's opinion that the labor market has met the condition for the Fed to begin a tapering of its asset purchases….Cashin said that the comment that "hit me over the head like a two-by-four" was Lacker's view of future U.S. GDP growth…that he expects that growth will average "about 2 percent going forward."  This level is "just above stall speed," Cashin said. "It's going to be dangerous to start tapering if you're just above stall speed."’  Art Cashin is director of floor operations at UBS Financial Services.  Story and video at…
http://www.cnbc.com/id/100999549

GDP has been around stall speed for so long that I had assumed that the “stall speed” term had been dropped by Wall Street - apparently not. 

My opinion: Since QE has had little effect on the economy, I doubt that the “Taper” even matters for the economy.  It matters to Wall Street, however, and I expect the markets to react negatively when Tapering (the slow-down of Fed bond-buying) starts.   

US STRIKE ON SYRIA ALMOST CERTAIN

The following report is from CNN…
“A preliminary U.S. government assessment of last week's chemical weapons attack in Syria has made these key findings:
--1,429 people were killed in an August 21 chemical weapons attack in Syria and asserted that "we assess with high confidence that the Syrian government carried out the chemical weapons attack against opposition elements in the Damascus suburbs."
-- The United States says it has "intelligence that leads us to assess that Syrian chemical weapons personnel ... were preparing chemical weapons munitions prior to" what Washington believes was a chemical weapons attack in the Damascus suburbs on August 21…
…Citing support from the Arab League, Turkey and France, Secretary of State John Kerry said Friday that "we are not alone in our will to do something about" last week's chemical weapons attack in Syria that he blamed on the regime of President Bashar al-Assad.”  Full story at…
http://www.cnn.com/2013/08/30/world/europe/syria-civil-war/index.html?iid=Lead

Kerry made it clear that the US must not embolden others to use chemical weapons by doing nothing.  He laid out such a clear case that it seems inevitable that the US will act.

Markets fell during Kerry’s speech, but rebounded afterwards.

MARKET REPORT
Friday, the S&P was down 0.3% to 1633 (rounded) at the close.

VIX was up 1% to 17.01.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE remained 49% at the close Friday.  Any number below 50% suggests trouble for the market, but the trend has been up, so it will be interesting to see what happens Tuesday.

New-lows outpaced new-highs today leaving the spread at -30 (it was -4 yesterday), with the 10-day moving average of change in spread trending up. 

Today’s reading of Internals is mixed on the market so let’s wait and see what happens next week. 

NTSM

Friday, 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.

GDP Revised Up to 2.5%…Jobless Claims…Summers; A Black Swan?

(I revised the title of this Post because search engines are sending people to an older similar post. - 4 Sep 2013) 

GDP (Briefing.com)
“Second quarter GDP was revised up to 2.5% in the second estimate from a previously reported 1.7%. That is up from a 1.1% gain in Q1 2013. The Briefing.com consensus expected second quarter GDP to be revised to 2.1%...Overall, the upward revision to GDP growth does not suggest that the underlying currents of weak growth are ending. Almost the entire upward revision came from a stronger-than-originally reported trade deficit, which is likely to reverse in the third quarter. That means the increase in GDP pulled potential growth from the third quarter into the second and was not the result of a strengthening economic situation…Even after the upward revision to second quarter GDP, expectations for future growth remain soft.”  Full story with charts and analysis at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/gdp.htm

INITIAL JOBLESS CLAIMS DROP (LA Times)

“The number of people filing for first-time unemployment benefits fell to a seasonally adjusted 331,000 last week from the previous week's revised figure of 337,000.  Analysts had expected the number to drop to 332,000.”
Story at…
http://www.latimes.com/business/money/la-fi-mo-weekly-jobless-claims-economy-20130829,0,5625754.story

SUMMERS AS FED CHIEF – BLACK SWAN EVENT (CNBC)

“Speculation that Larry Summers is the favored candidate to take over Ben Bernanke as Fed chief has resurfaced in recent weeks, prompting a strong backlash from some industry watchers, with one going as far as labeling his potential appointment as a ‘black swan’ event….
…Summers is seen as a greater hawk between the two, which analysts say could mean the rapid unwinding of the massive U.S. monetary stimulus that has supported the economy.  ‘That could be the black swan that people aren't expecting,’ Bouroudjian said.’”  Story at…
http://www.cnbc.com/id/100995386

MARKET REPORT
Thursday, the S&P was up 0.2% to 1638 (rounded) at the close.

VIX was up 2% to 16.81.

The Pros sold late in the day and VIX went up, so maybe traders are preparing for the return of market participants.  Volume has been 10-20% below normal this week, depending on the day, so we can’t place too much value in any of this week’s data.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE broke up to 49% at the close Thursday, a big improvement over yesterday.  Any number below 50% suggests trouble for the market.

New-lows slightly outpaced new-highs today leaving the spread at -4 (it was -43 yesterday), with the 10-day moving average of change in spread now up. 

Today’s reading of Internals is mixed so let’s wait and see what happens next week.  The pre-Holiday trading has been slow and choppy with almost daily reversals.

NTSM

Thursday, 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.

Not Much News; but Plenty of Negative Analysis

GRAVE CONCERNS ABOUT MARKET RISK (Hussman)
“Despite our grave concerns about market risk here, we also have to allow for the possibility that the recent bull market will carry further. Yet it’s critical to understand that allowing for that possibility has rarely been successfully achieved by ignoring overvalued, overbought, overbullish syndromes or deteriorating market action. Rather, the most useful opportunity to respond constructively is on an early improvement in market action, after overvalued, overbought, overbullish conditions have been cleared" - John Hussman, PhD, Weeky Market Commentary for 26 August.  Full commentary at...

http://www.hussmanfunds.com/

GET READY FOR A MASSIVE INTEREST RATE SHOCK SOON (CNBC)

“[There is a belief]…that foreign investors have no choice but to perpetually support the U.S. debt market at any price and at any yield.  But … the latest data show weakening demand in overseas purchases of Treasurys….When the Fed stops buying Treasurys, foreign and domestic investors will do so as well. This means for a period of time there won't be anyone left to buy Treasurys unless prices first plunge.

The effects of rising rates will be profound on currencies, equity prices, real estate values and economies across the globe. It would be wise to prepare your portfolio…”  Full story at…
http://www.cnbc.com/id/100990929

As always…when?  The timing of this sort of negative call is the key and it’s anyone’s guess.  How soon is “soon”?

LEVERAGE NEAR CRISIS PEAK (Business Week)

“Company debt loads in the U.S. are approaching the highest level since the aftermath of the financial crisis as borrowing to finance mergers and shareholder payouts exceeds earnings growth.  Debt levels have increased faster than cash flow for six straight quarters, boosting the obligations of investment-grade companies in the second quarter to 2.09 times earnings before interest, taxes, depreciation and amortization, according to JPMorgan Chase & Co.  That…compares with 2.13 in the third quarter of 2009, when it peaked after the deepest recession since the Great Depression.”  Story at…
http://www.businessweek.com/news/2013-08-28/bond-binge-expanding-leverage-toward-crisis-peak-credit-markets

Leverage is just a distortion associated with the Fed QE policy of driving interest rates down.  It doesn’t look particularly worrisome unless earnings completely fall off a cliff. 

The issue is earnings though, because any reduction in earnings is likely to be punished.  It won’t take a huge drop in earnings to cause some real problems for the stock market.

MARKET REPORT
Wednesday, the S&P was up 0.3% to 1635 (rounded) at the close.

VIX was down 2% to 16.49. 

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE was 44% at the close Wednesday, a slight improvement over yesterday.  Any number below 50% suggest trouble for the market.

New-lows outpaced new-highs today leaving the spread at -43 (it was -61 yesterday), with the 10-day moving average of change in spread now slightly up.  The change in 10-day spread was slightly down yesterday.   

Today’s reading of Internals is negative on the market, but not strongly.

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.

Correction On!

Today the S&P 500 closed 1.7% below the 50-day moving average, now at 1660.  That will convince many to throw in the towel and sell; thus the correction is likely to pick up some steam even though some stats suggest an up-day Wednesday. 

MARKET TECHNICALS TAKE SHAKY LATE-AUGUST TURN (MarketWatch) — “The major U.S. stock benchmarks have taken a technically shaky turn amid renewed geopolitical tensions…the S&P 500’s backdrop highlights the headline technical issue…The index continues to vacillate at its 50-day moving average — currently S&P 1,660 — and this area remains a useful bull-bear technical gauge.” Story at… http://www.marketwatch.com/story/market-technicals-take-shaky-late-august-turn-2013-08-27-131033326

S&P 500 FUTURES ARE BREAKING TOO (ZeroHedge)

“For the first time since the most recent rally began in November, S&P 500 futures have retested (and broken below) the 100-day moving average within days of a previous break (without making new highs). It would appear the…[buy the dip]…mentality is less exuberant with war and a tapering Fed in the background.”  Story at…
http://www.zerohedge.com/

MARKET REPORT
Monday, the S&P was down 1.6% to 1630 (rounded) at the close.

VIX was up 12% to 16.82. 

Today’s move was a statistically significant in price and volume and that may signal an up-day tomorrow; the statistics show this is true about 62% of the time.  This pattern is a bit less secure in a correction, because at some point there will be a waterfall-drop where, statistics be dammed, the market will go down sharply.        

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE fell to 42% at the close.

New-lows outpaced new-highs today leaving the spread at -61 (it was +76 yesterday), with the 10-day moving average of change in spread now trending down strongly.  (5-days ago it was up strongly.)

Today’s reading of Internals is negative on the market and suggests further downside ahead. 

NTSM

Tuesday, 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.

Durable Goods Orders Plunge…Pentagon May Fire Thousands…Recession

DURABLE GOODS ORDERS PLUNGE 7% (Global Economic Trend Analysis)
“Is this the plunge that accelerates or is another bounce coming? Given the "unexpected" plunge in new housing and the rise in mortgage rates, I suggest an acceleration to the downside.” - Shedlock
Full story at http://globaleconomicanalysis.blogspot.com/2013/08/durable-goods-orders-plunge-73.html

I think it is too early to panic.  From dShort.com: “If we exclude transportation, "core" durable goods were a less negative -0.6 percent and up 5.9 percent YoY.”  See the analysis by Advisor Perspectives at…

http://advisorperspectives.com/dshort/updates/Durable-Goods-Orders.php

PENTAGON WEIGHS FIRING THOUSANDS UNDER 2014 SPENDING CUTS(Bloomberg)

“The Defense Department may have to fire at least 6,272 civilian employees if automatic cuts known as sequestration slice $52 billion from its fiscal 2014 budget, according to a Pentagon planning document…For the most part, major weapons programs aren’t being targeted for extensive reductions, according to the plan, which was a presentation by Pentagon budget and cost-assessment officials for generals and admirals who oversee force structure and resources for their respective services…
…The planning document is stamped “Draft/Pre-Decisional”and said no final decisions have been made.”
http://www.bloomberg.com/news/2013-08-22/pentagon-weighs-firing-thousands-under-2014-spending-cuts.html

ATA TRUCK TONNAGE INDEX FELL 0.4% IN JULY (ATA)

“The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index slipped 0.4% in July after edging 0.1% higher in June…The latest drop was the first since April... ‘After gaining a total of 2.2% in May and June, it isn’t surprising that tonnage slipped a little in July,’ ATA Chief Economist Bob Costello said. ‘The decrease corresponds with the small decline in manufacturing output during July reported by the Federal Reserve last week.’”  Full press release at…
http://www.truckline.com/article.aspx?uid=6de8d491-ed6d-4d72-a4b0-d1115193d2be

RECESSION?

The trucking sector correlates pretty well to the economy, but this is only one data point and no need to panic.  We’ll need more than one month to get concerned. 

One note of caution: Cyclical stocks are now underperforming the S&P 500 by 0.5% over the last 10-days.  This may be the first sign that investors are beginning to have some doubts about the economy; it is a definite warning of correction if the trend continues.  As it is now, it doesn’t mean much; it just warrants watching.

MARKET REPORT
Monday, the S&P was down 0.4% to 1657 (rounded) at the close.

VIX was up 7% to 14.99.          

NEWS TRUMPS TECHNICALS. The market had been doing OK until John Kerry called Syria's use of chemical weapons "undeniable" around 3:30PM and the markets tanked.  If you want more details here’s a link to a TIME Swampland story, video and text of Kerry’s remarks...

http://swampland.time.com/2013/08/26/kerry-obama-seeks-accountability-for-syrian-chemical-weapons-use/

MARKET INTERNALS (NYSE DATA)

Market Internals are now mixed with breadth (measured as percent-bulls) falling again and new-high/new-low data still looking generally positive, although without any big clear-cut reversal like the last time the S&P 500 visited the 50-day moving average.

The 10-day moving average of stocks advancing on the NYSE fell to 44% at the close, reversing the up-trend in the 10-dMA.

New-highs outpaced new-lows today leaving the spread at +78 (it was +3 yesterday), with the 10-day moving average of change in spread now trending slightly up.  This indicator is now moving up, but not strongly.

Today’s reading of Internals is neutral on the market, with conflicting information.  (News trumped the technicals.)

NTSM

Monday, 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.

Stock Market History

 

HISTORY LESSON 101 – BULL MARKETS DURING SECULAR BEAR MKTS

Chart from http://www.hussmanfunds.com/

 

The current Bull-market has been ongoing since March 2009 or for 52 Months.  The return for the current Bull is 145%.  Historically, this bull is long-in-the-tooth and overdue to end.  Both the return and the duration are pushing the Historical limits and far exceed the averages for both duration and return. 

 

STOCK MARKET HISTORY 201 – INDEX VALUE VS REGRESSION LINE (dShort.com)

Chart from Advisor Perspectives at

http://www.advisorperspectives.com/dshort/updates/Regression-to-Trend.php

 

“If the index should decline over the next few years to a level comparable to previous major bottoms, it would fall to the 450-500 range.”  Analysis at Advisor Perspectives at…

http://www.advisorperspectives.com/dshort/updates/Regression-to-Trend.php

 

Are these history lessons important?  See the above cartoon.

 

MARKET REPORT
Friday, the S&P was up 0.4% to 1664 (rounded) at the close.

VIX was down 5% to 13.98.          

 

The S&P 500 did not decisively break 50-dMA and repeating yesterday’s comment, statistically, there has been little increase in price-volume action that would indicate a correction is underway so this market may turn up again anytime; today, Friday at the close, internals are hinting at a new uptrend.

 

MARKET INTERNALS (NYSE DATA)

Market Internals are reversing and the trend in internals have shifted upward.  This reversal is beginning to suggest a turn-around for the Market Indices.  It is always difficult to know if this, or any reversal, will be durable or just last a few days. NTSM uses 10-day moving averages for these smaller reversal calls so I can only say that for the past 10-days, the trend has shifted up; but we need to look at other clues to guess how long it may last. 

 

The 10-day moving average of stocks advancing on the NYSE was 45% at the close. It was 39% a week ago so it was up 6% in a week.  This is not a huge reversal like we saw on 25 June when the percentage of stocks advancing was up 7% in 1-day and up 13% over 2-days.

 

New-highs outpaced new-lows today leaving the spread at +31 (it was +3 yesterday), but the 10-day change in spread is still trending slightly down. 

 

The difficulty is knowing whether this will result in a small retracement up, say a 50% retracement back to about 1675, or whether the markets will climb above their prior highs around 1710 on the S&P 500. 

 

Either way I doubt that this is a bottom that should be bought with long-term money.  I still think we need to test the 200-day moving average (1556 today) or retest the prior low in the 1575 area.

 

Topping can be a drawn out process. In 2012 the S&P 500 was nearly flat from February until July before the correction really got going.

 

Traders have a more difficult decision.  Those who are short may wish to cover, but since the prior high is only 1707, about 3% above its present value, there is some risk either way since they must time a reentry at the top.

 

I wouldn’t be surprised to see the S&P 500 trade back to around the prior highs, or make new highs, and then fail from there.

 

Today’s reading of Internals is positive on the market, but not hugely so.  Perhaps Monday will give some better idea of direction - in the end, the S&P 500 is still 7% above its 200-day moving average and that limits upside potential to less than 5-percent, at least that has been the recent history.

 

NTSM

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

 

VIX, and the options boys by proxy, refuse to confirm any correction underway. SENTIMENT has fallen to 56%-bulls and that could allow some movement upward.

 

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.



Tapering on the Way…Recession on the Way…Growth on the Way?

FOMC – BROAD SUPPORT FOR TAPERING TIMELINE (Bloomberg)
“Federal Reserve policy makers were ‘broadly comfortable’ with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves…’A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases,’ the minutes show. ‘Almost all participants confirmed that they were broadly comfortable” with the committee moderating ‘the pace of its securities purchases later this year.’”  Story from Bloomberg at…
http://www.bloomberg.com/news/2013-08-21/fomc-minutes-show-broad-support-for-bernanke-tapering-timeline.html

REVERSE REPO PLAN (HOW TO PULLBACK CASH FROM THE BANKS) (Reuters)

“The Federal Reserve is considering a new tool to help drain cash from the banking system and keep short-term interest rates on target when it shifts from its current cheap-money policy, minutes of the Fed's July policy meeting showed on Wednesday…creating a fixed-rate facility for overnight reverse repurchase agreements, or reverse repos…’They are setting the stage for an eventual policy tightening by sometime in 2015,’ said Mary Beth Fisher, head of U.S. interest rates strategy at SG Corporate & Investment Banking in New York.”  Full story at…
http://www.reuters.com/article/2013/08/21/us-usa-fed-minutes-repo-idUSBRE97K0ZN20130821?feedType=RSS&feedName=businessNews

IS THE US HEADED TOWARDS RECESSION? (dShort.com)

“A country experiences an economic slowdown when it's industrial production lags, its jobs market shows a dismal performance, corporate profits deteriorate, and the general standard of living declines.  Sad to say, this is exactly what the U.S. economy is experiencing right now…Learn from history—the "Tech Boom" of the late 1990s and the credit crisis of the mid-2000s are only two examples of how things can go terribly wrong so very quickly. And that's why I expect this next recession to blindside politicians and the mainstream media.”  Story from Advisor Perspectives at…
http://advisorperspectives.com/dshort/guest/Michael-Lombardi-130821-Recession-Risk.php

RECESSION?

Perhaps, but I track the relative performance of the Morgan Stanley Cyclical Index versus the S&P 500 Index as a proxy for the market’s expectation of recession (since the cyclicals are more recession sensitive). Currently, there is NO expectation of recession by market participants.

INITIAL CLAIMS RISE BUT NEAR 6-YEAR LOWS (CNBC)

“Initial claims for state unemployment benefits climbed 13,000 to 336,000, just above the level expected by economists in a Reuters poll, Labor Department data showed on Thursday…The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 29,000 to about 3 million in the week ended Aug 10.”  Story at…
http://www.cnbc.com/id/100980548

LEADING INDICATORS SIGNAL GROWTH (24/7 Wall St.)

“The Conference Board has released its index of leading economic indicators (LEI). While the name sounds like…a preview, it is a July number and we would caution that many of the components inside the total tally are already known and visible before this was released. July’s leading indicators were up by 0.6%, and Bloomberg was calling for a consensus reading of 0.5%...The improvement in the LEI, and pick up in the six-month growth rate, suggest better economic and job growth in the second half of 2013. However, the biggest uncertainties remain the pace of business spending and the impact of slower global growth on U.S. exports.”  Story at…
http://247wallst.com/economy/2013/08/22/leading-indicators-signal-more-growth-for-rest-of-2013/

MARKET REPORT
Thursday, the S&P was Up 0.9% to 1657 (rounded) at the close.

VIX was down 7% to 14.76.           

The S&P 500 is sitting at the 50-dMA.  Statistically, there has been little increase in price-volume action that would indicate a correction is underway so this market may turn up again anytime...or not.  It’s not clear at this point so I am watching the clues.  One set of clues is the Market Internals.  

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE was 43% at the close and it is still trending down.  Usually a value below 50% signals additional trouble for the markets.    

New-highs slightly outpaced new-lows today leaving the spread at +3 with the 10-day change in spread still trending slightly down. 

Today’s reading of Internals is negative on the market, but not as strong a signal as it has been.    

NTSM

Thursday, 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.

Correction - More than 5%

BYRON WIEN, VICE CHAIRMAN OF BLACKSTONE ADVISORY PARTNERS (CNBC-TV)
Economy:
“My concern’s with the second half is the economy isn't building the momentum everyone thought. When the stock market was doing well and it looked like the economy was going to pick up, there were a lot of people that thought economic growth would go to 3% real and I don't think that's likely.  I think we could have another couple quarters at 2%.  People are very bullish, they think we could do 3.5% in 2014, and I think that may be a question also.  We need a reality check.”

 

Correction:

“…I think the market has further to go on the downside. One point I'd make is everybody says the market can correct 5%.  The market always has a tendency to go farther than you think, up and down and I think the correction could be greater than 5%.”  Video at…
http://video.cnbc.com/gallery/?play=1&video=3000192531#eyJ2aWQiOiIzMDAwMTkyNTMxIiwiZW5jVmlkIjoiakVFYkYyR0ZUVmNzdFliOElRRy9aQT09IiwidlRhYiI6InRyYW5zY3JpcHQiLCJ2UGFnZSI6IiIsImdOYXYiOlsiwqBMYXRlc3QgVmlkZW8iXSwiZ1NlY3QiOiJBTEwiLCJnUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ==

CAPITAL FLOWS BACK TO US – ASIAN MARKETS FADE (Bloomberg)

"Asia’s role as the world’s growth engine is waning as economies across the region weaken and investors pull out billions of dollars…'The eye of the storm is directly above emerging markets now, two years after it hovered over Europe and four years after it hit the U.S.,' said Stephen Jen, co-founder of hedge fund SLJ Macro Partners LLP in London and former head of foreign-exchange strategy at Morgan Stanley. 'This could be serious for Asia.'” Story at…
http://www.bloomberg.com/news/2013-08-19/clouds-gather-over-asian-economies-as-capital-flows-back-to-u-s-.html

Perhaps…but you wouldn’t know it from the recent stock market action.

OBAMACARE, TEPID US GROWTH FUEL PART-TIME HIRING (Reuters)
“U.S. businesses are hiring at a robust rate. The only problem is that three out of four of the nearly 1 million hires this year are part-time and many of the jobs are low-paid…"They have put some of the full-time positions on hold and are hiring part-time employees so they won't have to pay out the benefits," said Client Staffing Solutions' Darin Hovendick. "There is so much uncertainty. It's really tough to design a budget when you don't know the final cost involved."…The delay in the Obamacare employer mandate "confused people even further," said Bill Peppler, managing partner at Kavaliro, a technology staffing firm in Orlando, Florida. "When we talk to customers, I still don't think anyone has a handle on this."  Story at...
http://www.reuters.com/article/2013/08/21/us-usa-economy-jobs-analysis-idUSBRE97K05K20130821

MARKET REPORT
Wednesday, the S&P was down 0.6% to 1643 (rounded) at the close.

The S&P 500 immediately sold off 10 points when the FOMC minutes were released at 2PM; rocketed up 15 points; then collapsed 10 points in the last hour to finish the day down 10 points.  Apparently, the Fed is split on when to end the taper and the investing public is split on how to interpret the Fed.  The key point may be that the pros sold heavily in the last hour of trading.

VIX was up 7% to 15.94  

The S&P 500 is about 1% below the 50-dMA and I’d say it’s not far enough below the 50-day for the bears to declare victory.  On the other hand, today’s collapse after 3PM might have the bears practicing their dances.   

The S&P 500 is about 6% above its 200-dMA. (Currently the 200-dMA is about 1550.)  That’s really my guess for this correction bottom, but it will need to test the prior low of 1573 first.  1573 might be a turning point too.  Just guessing…

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE was 41% at the close.  Usually a value below 50% signals. additional trouble for the markets.   

New-lows still outpaced new-highs today leaving the spread at -115 with the 10-day change in spread still trending slightly down.  There was a little good news, because the spread improved today as new-lows dropped significantly (from 247 to 140).  Whether this really means anything depends on the trend.  Daily, these values jump around a lot.

Today’s reading of Internals is negative on the market and suggests the market is likely to continue its downward trend. (No guarantees, of course.) 

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.

End QE: Fed's Jeffery Lacker

MORE QE WON’T HELP (MarketWatch)
“Richmond Federal Reserve Bank President Jeffrey Lacker made a case Sunday for ending QE3: the costs of asset purchases are rising and any future benefits are likely to be small.  “The data in the first half of the year in my view is confirming my sense that the asset purchases were unlikely to have a noticeable effect on growth, ” Lacker said in an interview with the Richmond Times Dispatch on Sunday.”  Story at…
http://blogs.marketwatch.com/capitolreport/2013/08/19/feds-lacker-more-asset-purchases-just-wont-help-economy/

Full Lacker interview from the Richmond Times Dispatch at…

http://www.timesdispatch.com/business/national-international/fed-s-lacker-sees-tough-choices-ahead-for-u-s/article_14c5ff6c-b37d-5492-8dac-d338cf5421bc.html

ALARM BELLS AT 10-YR TREASURY OF 2.9% (CNBC)

“Art Cashin says "alarm bells" will go off for stocks if the yield on the 10-year Treasury note hits 2.9 percent.  Cashin, UBS' director of floor operations at the NYSE, also told CNBC's Bob Pisani at midday that rising interest rates are already causing some problems for stocks in emerging markets like Thailand, India and Indonesia.”  Video and summary from CNBC at…
http://www.cnbc.com/id/100972141

CHICAGO FWD NATIONAL ACTIVITY INDEX – BELOW AVG GROWTH (Forex Factory)

“Index shows economic growth in July again below average The Chicago Fed National Activity Index (CFNAI) edged up to –0.15 in July from–0.23 in June.”  Story at…
http://www.forexfactory.com/news.php?do=news&id=443135

MARKET REPORT
Tuesday, the S&P was Up 0.4% to 1652 (rounded) at the close.

The S&P 500 again sold off in the last hour when the pros are in action.
 
VIX was down 1% to 14.91

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE rose to 42% at the close.  Usually a value below 50% signals additional trouble for the markets.   

New-lows still outpaced new-highs today leaving the spread at -221 with the 10-day change in spread still trending down.

Today’s reading of Internals is negative on the market and suggests the market is likely to continue its downward trend, although a temporary bounce is possible. 

NTSM

Tuesday, 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.