“The Fed said it would start to taper its bond-buying program to $75 billion a month from $85 billion, an initial move to unwinding the stimulus that the central bank began to help the economy heal from the recession that came after the near meltdown of the country's financial system. At a news conference, Fed Chairman Ben Bernanke said the central bank would likely make similar moderate steps at future meetings so long as the data support such moves.” Story at…
http://www.cnbc.com/id/101282382
The FED says that Tapering is not tightening. I can remember many times in the past when
the FED increased short term rates that were at the time still below the rate
of inflation. I thought this was simply
easing up on the accelerator, but the markets generally didn’t agree and
eventually reacted negatively. It is
likely that tapering will eventually be seen as a negative for the stock
markets (not the economy), but not today.
The above chart is interesting and gives perspective, but I think it is
suspect. In the periods since 1970, the
FED was typically hiking interest rates to slow an over-heated economy. In those situations, one would expect that
the markets would be up after the first Fed tightening.
EVEN WALL STREET’S BEARS SAY STOCKS WILL RALLY NEXT YEAR (Marketwatch)
“It’s that time of year. Visions of next year’s S&P 500 Index price
targets are dancing in stock strategists’ heads, and retail investors are
wondering if the New Year will bring a nasty stock hangover. A
MarketWatch-compiled consensus of 10 Wall Street strategists suggests the big
firms are expecting more portfolio sugar plums, with the average anticipating a
10% rise in the S&P 500 next year. The sunny outlook fits with the trend
summed up by S&P Capital IQ Chief Equity Strategist Sam Stovall as “good
years often follow great years.” Story
and many supporting charts at… http://www.marketwatch.com/story/even-wall-streets-bears-forecast-stock-rally-next-year-2013-12-18
MARKET REPORT
Wednesday, the S&P 500 was up 1.7% to 1811 (rounded)
on the FED decision to taper. The market
reaction was a surprise to most analysts.VIX was down 15% to 13.8.
In the end, the S&P 500 bounced off the 50-dMA again
and it seems that the lower trend line was indeed in-line with the 50-dMA.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 51%
at the close Wednesday. (A number above 50%
for the 10-day average is generally good news for the market.)
New-highs outpaced new-lows Wednesday, leaving the spread
(new-hi minus new-low) at + 104 (it was -2 Tuesday). The 10-day moving average of change in the spread was +13.
In other words, over the last 10-days, on average, the spread has increased by 13
each day.
Market internals improved overall, and are now positive
on the market.
Market Internals are a decent trend-following analysis of
current market action, but in 2013 (so far), if I had been buying the positive
ratings and selling negative ratings I would have under-performed a
buy-and-hold strategy.
As I noted yesterday, I’ve added a 5-10-20 Timer as a BUY
signal for the markets. Today, it
switched from HOLD to BUY. I will not
move tomorrow, because Wednesday was statistically significant to the upside and
that predicts a down day tomorrow by about 60% [and I'd like to be check Thursday's internals to see if today was a one time day] so I kept a HOLD on the indicator.
Perhaps I’ll put some more money into stocks on Friday. Sentiment is still screaming high and I expect some
profit taking early in 2014. It will be hard for me to move back in at this point,
but that is what the analysis shows. Bottom line: I'll increase my stock holding, but it will be measured…like the taper...I'll add 10% this month and reassess. There is some risk here too, because I need to do
some significant testing with this indicator and I haven’t had the time.
MY INVESTED POSITION (NO CHANGE)
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 now under-performing my own system by about 6%!) 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.
I still lean toward getting back in, after a pullback. NTSM did give several buy signals over the
weeks of 14 and 21 Oct, but the market has looked too frothy to rush back
in…we’ll see if the market will pullback so I can join the insanity.
