Summers withdrew from consideration because it became apparent that he could not be confirmed by the Senate. Apparently, there were few who liked Larry Summers as a potential FED Chairman. He was seen as a “Hawk” who would reverse QE faster than others. Therefore, the Banks and many on Wall Street were worried about him, and given that the Banks control the politicians through campaign donations, he was receiving a lot of criticism. Since there is little truth in Politics, opponents (and the press) focused on his personality and, ironically, that he was too close to Wall Street as reasons that he was unacceptable. Now that he has taken his name out of the running, Wall Street parties.
TAPER IS PRICED IN (MarketWatch)
“Strategists have said markets are now pricing in a
decision by the Federal Reserve to start scaling back its bond purchases when
it concludes a two-day policy meeting Wednesday…Doug Coté, chief market strategist
at ING U.S. Investment Management, said he expects the central bank to announce
a “full taper” on Wednesday. That means a reduction of about $20 billion in the
Fed’s monthly bond buys, he said. Each month, the central bank has been
purchasing $85 billion worth of Treasurys and mortgage-backed securities…Such a
move would be “a very positive message to the market, and I think it would be
‘buy on the news,’” Full story at…http://www.marketwatch.com/story/stocks-seen-taking-fed-taper-in-stride-this-week-2013-09-15?dist=beforebell
Historically, the markets tend to react after 3-changes
in FED policy. So it could take several
more “taperings” to see much effect on the markets…or not. Since QE is a new animal, it is guesswork to
predict if the taper means anything.
Most, however, are guessing taper is bad for the markets, so with
history as a guide, we’ll watch for a market reaction: if not now, then after
2-more QE reductions.
MANUFACTURING REGAINING MOMENTUM (Reuters)
“…"Growth in the manufacturing sector is picking up
and will run faster over the balance of the year than has been the case in
recent months," said John Ryding, chief economist at RDQ Economics in New
York. Industrial output increased 0.4 percent last month after
being flat in July, the Federal Reserve said.. .In a separate report, the New
York Federal Reserve said its Empire State general business conditions index slipped
to 6.29 from 8.24 in August. A reading above zero indicates expansion.” Story at…http://www.reuters.com/article/2013/09/16/us-usa-economy-output-idUSBRE98F0DV20130916
In the big picture, the growth was very small so it is
difficult to get too excited. Looks like
more of the same to me – very slow growth.
Expect the FED to reduce bond buying, but not by much.
MARKET REPORT
Monday, the S&P finished up 0.6% to 1698 (rounded) at the close.
VIX rose 1.6% to 14.38 so the options boys aren’t quite so confident
about this rally.Monday, the S&P finished up 0.6% to 1698 (rounded) at the close.
The S&P 500 is about 1% below its all-time high and nearly 8% above
its 200-dMA. 10% above the 200-dMA has been a trouble point for the S&P 500
and the index has not been more than 13% above its 200-dMA in all of 2013.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks
advancing on the NYSE climbed to 59% at the close. (A number above 50% for the 10-day average is
generally good news for the market.)
New-highs far outpaced new-lows today,
Monday, leaving the spread (new-hi minus new-low) at +206 (it was +33 Friday),
with the 10-day moving average of change in spread positive 24, i.e., for the
last 10-days the average, daily change in spread has been +24. That’s a very healthy number.
The Internals are positive on the market in
the short term.
NTSM
Monday, the overall long-term NTSM analysis remains
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.
