“The number of Americans filing new claims for unemployment benefits fell for a second week last week, suggesting a sharp slowdown in job growth in December was likely to be temporary. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 326,000, the Labor Department said on Thursday. Claims for the prior week were revised to show 2,000 fewer applications received than previously reported.” Story at…
http://www.foxbusiness.com/economy-policy/2014/01/16/weekly-jobless-claims-fall-for-second-straight-week/
The 4-week moving average was down 13,500 to 335,000. The 4-week average is considered to give a better picture of claims.
BUBBLE VALUATION (Global Economic Trend Analysis)
As reported by Mish Shedlock, “Value investor Grantham, Mayo, Van Otterloo (GMO) now estimates US stocks are poised for annualized losses for the next seven years.” “So what?” you say. “We have heard that story for years from Hussman, and others, they were all wrong!” Perhaps, but GMO has made good calls in the past: “In December 1999, GMO thought the S&P 500 would deliver negative returns for a decade. In 2007 that prediction probably looked ridiculous. Yet, it happened. When GMO predicts negative returns, it's smart to pay attention.” - Mish Shedlock. Full story and charts at…
http://globaleconomicanalysis.blogspot.com/
CRASHES, CORRECTIONS AND MONDAY’S BEAR MARKET (Barry Ritholtz)
“On Monday, we saw a sell-off of more than 1 percent across major U.S. markets. Europe and Asia followed suit the next day. Judging by the e-mails I received, this was it, the beginning of the end, and “you unrepentant bulls are finally going to get what you deserved.” Except not quite yet. Tuesday and yesterday markets put in back-to-back rallies that erased the losses, and then some... Bullish sentiment has gotten frothy, and markets have become overbought. But they can stay that way -- “persistently overbought” –--for extended periods of time….Rather than guessing when this bull market ends, investors do have other options to select from. You can be prudent without embracing the idea an imminent crash is coming each time markets twitch 1 percent.” Sage advice with a some market crash history from Barry Ritholtz at…
http://www.bloomberg.com/news/2014-01-16/crashes-corrections-and-monday-s-bear-market-.html
A prudent option would be to not go “all-in” when market conditions are suspect.
Barry Ritholtz linked a report by Ed Yardini that is a series of charts showing corrections and crashes from 1929 to the present. I have linked that report here…
http://www.yardeni.com/pub/sp500corrbear.pdf
MARKET REPORT
Thursday, the S&P 500 was 0.1% to 1846 (rounded).
VIX rose about 2% to 12.53.
The 10-year Treasury Note closed at 2.84% yield. Rates at 3% or above are considered by some traders to be “trouble-for-stocks”.
Sentiment is falling slowly. The highest sentiment readings usually occur after a top as traders by the dip. Sentiment peaked (so far) at of 83%-bulls on the 30 and 31 Dec and 2 and 10 Jan. The top was 31 December and matched with a second top on 15 Jan. Sentiment now is 80% so perhaps there is a slight hint of a correction. Sentiment is never tradable by itself though, so unless we see more signs there is no point in trying to call a top now.
Breadth was quite positive today indicating most stocks on the NYSE went up while the S&P 500 went down. Usually, the majority wins so an up-day is indicated for tomorrow to catch up.
MARKET INTERNALS (NYSE DATA)
Breadth was positive Thursday with 58% of stocks advancing on the NYSE. The 10-day moving average of stocks advancing climbed to 57% at the close Thursday. (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Thursday, leaving the spread (new-hi minus new-low) at +161 (it was +231 Wednesday). The 10-day moving average of change in the spread improved to 11. In other words, over the last 10-days, on average, the spread has increased by 11 each day.
Market Internals are a decent trend-following analysis of current market action, but in 2013, if I had been buying the positive ratings and selling negative ratings I would have under-performed a buy-and-hold strategy.
NTSM
The four areas of analysis, Sentiment, Price, Volume and VIX haven’t changed and are currently rated as follows:
Sentiment remains screaming high, though slightly lower than yesterday, at 80%-bulls (5-dMA of selected Rydex/Guggenheim funds) and that’s a negative; Price is positive since up-days have been larger than down-days over the past month; VIX and Volume remain neutral.
The most recent BUY signal for the NTSM system was 25 October. The “5-10-20 Timer” switched to BUY from HOLD on 18 December.
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. Unless I get a SELL signal
in the NTSM system, I will continue to income-average (a little each month)
into the stocks to get my %-invested up to around 50% (max for me now) unless
there is a correction that would allow me to move in sooner and at a higher
percentage. Since that is my expectation, I have not upped my invested
percentage in one move as I normally would.
