“The Federal Reserve will trim its monthly bond
buying by $10 billion to $65 billion, sticking to its plan for a gradual
withdrawal from departing Chairman Ben S. Bernanke’s unprecedented easing policy.
“Labor market indicators were mixed but on balance showed further improvement,”
the Federal Open Market Committee (FDTR) said
today in a statement following a two-day meeting in Washington…”
Story at…
http://www.bloomberg.com/news/2014-01-29/fed-cuts-qe-to-65-billion-pace-as-labor-market-improves-further.html
http://www.bloomberg.com/news/2014-01-29/fed-cuts-qe-to-65-billion-pace-as-labor-market-improves-further.html
OBAMA MINIMUM WAGE HIKE FOR FEDS (CNBC)
Obama announced at the State of the Union that he is hiking the minimum wage for federal contractors. From CNBC: “…only a tiny number of workers will receive any benefit while economists continue hotly to dispute the broader merits of minimum wages as an anti-poverty program. According to the White House, the kinds of contractors who will benefit from the minimum-wage boost are janitors, construction workers and those who wash dishes, serve food and do laundry on military bases.” Story at…
http://www.cnbc.com/id/101371009
Obama announced at the State of the Union that he is hiking the minimum wage for federal contractors. From CNBC: “…only a tiny number of workers will receive any benefit while economists continue hotly to dispute the broader merits of minimum wages as an anti-poverty program. According to the White House, the kinds of contractors who will benefit from the minimum-wage boost are janitors, construction workers and those who wash dishes, serve food and do laundry on military bases.” Story at…
http://www.cnbc.com/id/101371009
I’m not sure about the construction workers. Their wages are set by the Davis-Bacon Act
and I am surprised that the President could change them.
EMERGING MARKET CRISIS – FORGEDABOUTIT (CNBC)
“Fears of an emerging market disaster have unnerved investors lately, but on Tuesday two stock market professionals dismissed fears of an imminent worldwide crisis and told CNBC there are several reasons to be optimistic about U.S. as well as global markets. This still will be a strong year for growth in the United States, Joseph Tanious, a global market strategist at JPMorgan Asset Management…He called for gross domestic product growth of about 3 percent. Jeremy Zirin, chief U.S. equity strategist at UBS Wealth Management Research, largely agreed with that GDP estimate and said doesn't believe the problems in emerging markets will reach the U.S, much less impact its growth trajectory.” Story at…
http://www.cnbc.com/id/101371354
“Fears of an emerging market disaster have unnerved investors lately, but on Tuesday two stock market professionals dismissed fears of an imminent worldwide crisis and told CNBC there are several reasons to be optimistic about U.S. as well as global markets. This still will be a strong year for growth in the United States, Joseph Tanious, a global market strategist at JPMorgan Asset Management…He called for gross domestic product growth of about 3 percent. Jeremy Zirin, chief U.S. equity strategist at UBS Wealth Management Research, largely agreed with that GDP estimate and said doesn't believe the problems in emerging markets will reach the U.S, much less impact its growth trajectory.” Story at…
http://www.cnbc.com/id/101371354
MARGIN DEBT
Margin is when you borrow money from a broker and buy stocks with the borrowed money. Since the stocks purchased on margin serve as collateral for the loan, when stock prices fall, brokers ask for more collateral. Investors can receive a telephone call, literally a “margin call” that can bring about forced selling to cover the extra collateral required. (I bet this is all computerized now.) High margin has a strong correlation to an approximate market top. (Note that market tops can take months to develop.
I think the following chart speaks for itself.
For commentary, inflation adjusted charts and analysis see dShort.com at...
Margin is when you borrow money from a broker and buy stocks with the borrowed money. Since the stocks purchased on margin serve as collateral for the loan, when stock prices fall, brokers ask for more collateral. Investors can receive a telephone call, literally a “margin call” that can bring about forced selling to cover the extra collateral required. (I bet this is all computerized now.) High margin has a strong correlation to an approximate market top. (Note that market tops can take months to develop.
I think the following chart speaks for itself.
For commentary, inflation adjusted charts and analysis see dShort.com at...
Chart from http://advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php
While many suggest that this year will be a good year for stocks, bigger picture indicators such as margin debt, FED tapering, Market Capitalization vs. GDP, Shiller PE (PE10 or CAPE) and others all indicate a major top is approaching. It will take a catalyst, but it is very likely coming within the year.
MARKET REPORT
Wednesday, the S&P 500 was down 1% to 1774 (rounded).
VIX was up about 10% to 17.35. (Correction off; correction on…make up your mind.)
The 10-year Treasury Note yield fell to 2.68%. The bond ghouls are enjoying the “crisis” as demand for bonds is up. (Rates fall as prices go up.) Rates at 3% or above are considered by some traders to be “trouble-for-stocks”.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing rose to 47%
at the close. (A number above 50% for
the 10-day average is generally good news for the market.) New-lows outpaced new-highs Wednesday, leaving
the spread (new-hi minus new-low) at minus 64 (It was minus 14 Tuesday). The
10-day moving average of change in the spread fell to minus 16. In other words,
over the last 10-days, on average, the spread has decreased by 16 each
day.
Overall, Internals are negative on the market.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading. In
2013, using these internals alone would have made a 16% return vs. 30% for the
S&P 500 (in on Positive out on Negative – no shorting). Of course, few trend-following systems will
do well in an extreme low-volatility, straight-up year.
NTSM
The NTSM system switched back to SELL today.
The four areas of analysis, Sentiment, Price, Volume and
VIX are currently rated as follows:
Sentiment is negative at 79%-bulls. Volume is negative (This is a variant of
on-balance-volume.) Price (calculates and compares the size of up and down
moves) and VIX(tracking direction and intensity of VIX) indicators are now
neutral, but both are very near negative levels. I also have a number of other indicators designed
to identify tops and bottoms such as the statistical analysis “panic-indicator”
that flashed sell last Friday.
I said yesterday, “I am surprised to see the VIX come
down so fast and this may indicate the “correction” is over.” Wednesday, it
retraced nearly the entire drop so – “correction-on.” It could still end quickly though. There is still so much optimism and the
S&P 500 is in that 1770-zone that I mentioned yesterday. More exacting souls are suggesting 1768 is
the line in the sand for the correction.
Below that support level there will be more losses; if it holds when tested - correction over.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. 30% is a reasonable level
of stock holdings for a correction, so I don’t need to reduce holdings since I
don’t think this will be a major crash. Even if a surprise collapse did take the stock
market down by 50%, I’d only lose 15% in the stock portfolio. On the other hand, if I am wrong, leaving 30%
invested in stocks hedges the bet since no system is perfect.
