The non-manufacturing sector expanded at a slower pace in September, according to the Institute for Supply Management. The services index came in at 54.4%, below expectations and below August's reading of 58.6%. A reading above 50 signals expansion. This was the 45th consecutive month above that level…the non-manufacturing index (in blue) continues to hover around the mid-50's, which is where it has been for the last 3 years: In other words, the Muddle Through Growth economy continues.” Full story at…
http://www.zacks.com/stock/news/110797/ism-services-report-disappoints
REVIEW OF THE MANUFACTURING ISM REPORT (Wall Street
Journal print edition) and NO TAPER
“Earlier this week the ISM Manufacturing Index registered
a reading of 56.2 for September, the highest in 29-months.” The article went on to suggest that the
Manufacturing number was more closely watched because it has a longer track
record and the Manufacturing number seems to track GDP. The article further predicted
that the ISM non-Manufacturing number would fall slightly to a “still-stellar”
57 and the FED would have to begin tapering QE.
With today’s poor Non-Manufacturing report, we may
conclude that the Taper is probably on hold.
Numbers aren’t improving.
MARKET VALUATIONS ARE EXTREME (Hussman Funds)
"The bottom line is simple...First, we view market
valuations as obscene, and likely to result in a market loss on the order of
40-50% over the next few years. Second, we view the recent inaction by the
Federal Reserve as creating a risk … a risk, of resumed speculation that might
create a speculative blowoff over a period of weeks.…The dominant risk is
that of deep and extended market losses. A possible speculative blowoff would
simply make the market’s subsequent losses that much worse.” John Hussman, PhD,
Weekly Market Comment, 30 nSeptember 2013,
from Hussman Funds at…http://www.hussmanfunds.com/
John Hussman is using the Shiller PE or the Cyclically
adjusted PE (CAPES) methodology. (Here
is my previous discussion of CAPE from 2 Apr 2012, titled, "Stock Market Advice
from Darth Vader."
http://navigatethestockmarket.blogspot.com/2012/04/stock-market-advice-from-darth-vader.html) In a nutshell, the data is quite compelling
that CAPE is a predictor for future market returns; however, CAPE alone does
not provide a good timing model for exiting the markets.
BILL GROSS (PIMCO)
“Don’t run for the hills b/c of the shutdown or the debt ceiling – Run b/c the
economy is slowing by itself.” – Bill Gross tweet reported by…http://www.zerohedge.com/news/2013-10-03/bill-gross-advice-why-you-should-run-hills
MARKET REPORT
Thursday, the S&P finished down 0.9% to 1679 (rounded) at the close.
(The 50-day moving average of the S&P 500 is now
1680. Back in the end of August the
index close about 2% below its 200-dMA so this, by itself, isn’t cause for
great alarm.) Thursday, the S&P finished down 0.9% to 1679 (rounded) at the close.
VIX was UP 6% to 17.64.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing on the NYSE
fell to 45% Thursday from 47% Wednesday.
(A number below 50% for the 10-day average is generally bad news for the
market.)
New-highs outpaced new-lows Thursday, leaving the spread
(new-hi minus new-low) at +55 (it was +80 Wednesday). The 10-day moving average of change in the
spread is minus 26. That just means that over the last 10-days, the spread has
been getting worse.
Market Internals are negative on the market for this
short term indicator.
Today was a statistically significant, down-day based on NTSM
analysis of price and volume. That
usually suggests an up day tomorrow and a possible short-term reversal.
NTSM
Thursday, the overall long-term NTSM analysis remains HOLD
at the close, but the system is now nearly a sell. (A “Sell” now would be almost meaningless
since the sell in this cycle was 15 April.)
The "near-sell" does indicate that market conditions are deteriorating, but it doesn’t
take a complex system to know that. The VIX indicator is now a negative due to rising VIX. Volume is borderline negative. Price is positive.
The 5-day, percent-bulls (bulls/(bulls+bears) in the
Guggenheim/Rydex funds I track was 68%-bulls as of Wednesday’s close. That is
an extreme bullish value that is usually a negative for the markets. “USUALLY” is the key word here. I suspect the crowd is betting that the
political impasse will be resolved easily.
If it is, the bet might be right. On the other hand, it is not clear to me that
the market is falling solely due to political wrangling.
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.
