GDP…Chicago PMI

GDP REVISED DOWN (Bloomberg)
"The economy in the U.S. grew at a slower pace in the fourth quarter than previously estimated, giving the expansion less momentum heading into 2014. Gross domestic product grew at a 2.4 percent annualized rate from October through December, compared with the 3.2 percent gain issued last month, revised figures from the Commerce Department." Story at...
http://www.bloomberg.com/news/2014-02-28/economy-in-u-s-expanded-at-slower-pace-than-first-estimated.html

CHICAGO PMI (Briefing.com)

The Chicago PMI [Purchasing Managers Index] increased to 59.8 in February from 59.6 in January. The Briefing.com consensus expected the Chicago PMI to fall to 56.0…the blustery weather in February had absolutely no effect on Chicago-area manufacturers.” Story and charts at…

http://www.briefing.com/Investor/Calendars/Economic/Releases/chi.htm

FED DOWNPLAYS WORRIES OF SLOW GROWTH (CNBC)

"Despite recent signs of a possible slowdown, the growth story for the U.S. economy remains intact, top Federal Reserve officials said on Friday, suggesting they will continue to support reductions in the Fed's massive bond-buying program.
Recent bad weather in large portions of the United States is having an impact on economic activity, but that is no reason for less optimism about economic prospects for the rest of the year, St. Louis Federal Reserve President James Bullard told CNBC television on Friday.” Story and video at…
http://www.reuters.com/article/2014/02/28/us-usa-fed-idUSBREA1R19820140228

MARKET REPORT

Friday, the S&P 500 was up 0.3% to 1859 (rounded).  Today the markets moved up early in the day and looked good.  This might be one of those days when even the pros bought in the morning.  All looked well until about 2PM when news/rumors began to emerge that Russia had invaded Ukraine and the market collapsed.  They recovered late day and improved into the close.
VIX fell about 0.3% to 14.0.

The yield on the 10-year Treasury Note rose slightly to 2.65%. 

I don’t know how the Ukraine crisis will affect stocks.  It will depend on events, but it may not have a huge effect unless the U.S. gets involved. 

The “correction” of Jan-Feb 2014 was slightly less than 6%.  Not much of a drop, but it seems that investors continue to buy stocks and as I have said before, the “correction” is over. I added more to the stock portfolio today, but I will remain vigilant.  This market still faces issues that should worry investors, especially High valuation in the PE10 (Shiller PE or CAPE).  That’s a PE based on 10-year averages of earnings that are then adjusted for inflation.  Other valuation issues are concerning too.  Should PE’s based on next year’s earnings be above normal when growth is a very low 2%?  Probably not, but that doesn’t mean more investors won’t pile in.  In fact, I expect that they will.

That’s why I upped my stock portfolio today.  Because of the 401k rules, I made my decision before noon.  

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing fell to 59% at the close.  (A number above 50% for the 10-day average is generally good news for the market.)   New-highs outpaced new-lows Friday, leaving the spread (new-highs minus new-lows) at +201.  (It was +113 Thursday). The 10-day moving average of change in the spread was +8. In other words, over the last 10-days, on average, the spread has increased by 8 each day. 10-dMA of up-volume rose today and the 10-dMA of percent of up volume was 64%. 

The internals are positive.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.

NTSM

The NTSM system switched to BUY today, Friday, because the 5-10-20 Timer is positive along with the Market Internals noted above.

MY INVESTED POSITION

I am about 50% invested in stocks because I upped my stock holdings by 10% on today.  That’s fully invested for me at least as far as long term money goes.

Initial Claims…Durable Goods…I plan to Buy more stocks.

INITIAL CLAIMS CLIMB BY 14,000 (Bloomberg)
“Jobless claims increased by 14,000 to 348,000 in the week ended Feb. 22, exceeding all forecasts in a Bloomberg survey and the highest level in a month, from 334,000 in the prior period…“We still have a fairly constructive view on the labor market,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York…“There have been some weather-related setbacks in hiring, but as it warms up, you’re going to see much better performance in labor market activity.”  Full story at…
http://www.bloomberg.com/news/2014-02-27/jobless-claims-in-u-s-climbed-last-week-to-one-month-high.html

DURABLE GOODS (Reuters)
“Orders for long-lasting manufactured goods excluding transportation unexpectedly rose last month as did a gauge of business spending plans, but that will probably not change views that factory activity is slowing. The Commerce Department said on Thursday durable goods orders excluding transportation rose 1.1 percent, the largest increase since May, after falling 1.9 percent in December…Data such as industrial production and regional factory surveys have suggested that manufacturing hit a soft patch in recent months…Overall durable goods orders fell 1.0 percent last month after plunging 5.3 percent in December.”  Story at…
http://www.reuters.com/article/2014/02/27/us-durable-goods-idUSBREA1Q15Q20140227
“Doug Short looked at Durable Goods adjusted for population and inflation and found that “…the real per-capita demand for durable goods had increased since the trough at the end of the last recession. But new orders remain far below their respective peaks near the turn of the century and earlier. A key driver, or lack thereof, for healthy growth in durable goods orders is growth in household incomes…which are down substantially since the end of the Great Recession.” Doug provides detailed analysis at …
http://advisorperspectives.com/dshort/updates/Durable-Goods-Real-Per-Capita.php

MARKET REPORT

Thursday, the S&P 500 was up 0.5% to 1854 (rounded).  So the Index finally broke above the old high.  Finally there was late day buying, so perhaps the pros are more optimistic after Yellen’s Senate testimony. I didn’t hear much different than we have heard before.

VIX fell about 2% to 14.04 so VIX offered a little bit of optimism.
The yield on the 10-year Treasury Note fell to 2.64%.  Apparently, the bond market is not as optimistic as the stock market.

MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 60% at the close.  (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-highs minus new-lows) at +113.  (It was +146 Wednesday). The 10-day moving average of change in the spread was +2. In other words, over the last 10-days, on average, the spread has increased by 2 each day. 10-dMA of up-volume is still falling (now only slightly), but I judge internals to be neutral due to falling up-volume.

The internals just missed a positive rating.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.

 
NTSM
The NTSM system remained HOLD today, Thursday.  The first Sell signal of this cycle was just over 2-weeks ago on 24 January. Sentiment has switched to negative at 78%-bulls.  That is based on the 5-dMA of the amount invested in long/short Rydex-Guggenheim funds that I track. All other NTSM indicators are neutral. 
The 5-10-20 Timer is now positive so if the Market Internals turn up I’ll change the indicator to a NTSM rating to a Buy.

MY INVESTED POSITION

I am about 40% invested in stocks because I upped my stock holdings by 10% on 12 February (S&P 500-1819) based on Market Internal signals. 

It looks to me that the correction is over as the markets seem to have followed the 2013 model of small declines, but no real correction.  Today the index broke thru the prior highs.  Market internals are almost positive.  The 5-10-20 Timer is positive.  Since I am allowed only 3-moves per month in my 401k it makes sense for me to increase my allocation in stocks now rather than waiting until the new month.  Tomorrow I will increase my allocation to fully invested (50% stocks) unless there is a significant deterioration in the market tomorrow; or if there is a big up day that might indicate a reversal. I feel a conservative stock allocation is warranted. The old guide to subtract your age from 100 and invest that percentage in stocks (but not less than 50%) seems like a good plan now.

Bears, Bears and Bears. Oh My! (Dorothy would be selling stocks.)

DOW-30: EIGHT-DOWN (Stephen Bauer)
“At this writing these eight Companies are now "Un-Favorable" and are suggesting that the very old Bull General Market is deteriorating. It is always a slow process of topping that requires much patience and discipline… Just for the record, it will only take a few more Companies to turn Bearish…” Stephen Bauer. Full commentary posted at Advisor Perspectives, dSort.com at… 
http://advisorperspectives.com/dshort/guest/Steven-Bauer-140226-Dow-30.php
Stephen Bauer says a simple way to detect market turns is to watch the Dow 30 and the performance of the 30 individual companies.  While I track breadth on the NYSE, this could be a better method since the Dow 30 should be the stronger and higher quality stocks.

SUCKERS RALLY NEARING AN END (Profit Confidential)

“Going into 2014, we saw production in the U.S. economy decline; consumer spending is pulling back, unemployment is still an issue, and the global economy is slowing. U.S. GDP is far from growing at the rate it did after the Credit Crisis. …Do investors really think that the central bank will be able to completely pull back on its quantitative easing program (which is scheduled to happen in 2014) and that key stock indices will continue to rise? With the yield on the 10-year U.S. Treasury up a whopping 88% since July 2012, there are too many factors and indicators working against the continued rally in key stock indices. The sucker’s rally in stocks is near its end.” – Michael Lombardi, MBA, published at Profit Confidential at… http://www.profitconfidential.com/stock-market/stock-prices-u-s-gdp-historic-relationship-turns-bearish/

2014 CHALLENGING YEAR (Bob Janjuah Blog)
“2014 is already proving to be more challenging, more volatile, more illiquid and more bearish than the significantly bullish positioning and sentiment indicators warranted as we came into this year, and way more bearish than the enormously bullish consensus emanating from the sell-side…I think the end of the post-2009 QE-driven bull is at hand (or very soon to be at hand) and the onset of the next significant (post-QE) deflationary bear market, which I think will run deep into 2015, should now begin to guide all investment decisions.” Bob Janjuah, Co-Head of GFI Macro Strategy at Nomura Securities Co. Ltd. Commentary at…http://bobjanjuah.blogspot.com/

None of the above are predicting a collapse today, though the comments are cautionary.  There’s a lot of economic information coming out Thursday and Friday, so stay tuned, it may send the markets up or down dramatically.

MARKET REPORT

Wednesday, the S&P 500 was unchanged at 1845 (rounded).  There was late day selling again today, emphasizing that Pros remain unsettled.

VIX was up about 5% to 14.35 and that suggests the options players are concerned, but at 14.35, VIX is not all that high overall.

The yield on the 10-year Treasury Note rose to 2.75% indicating bond selling. Yield has fallen for most of 2014 so the bond market is confirming that stocks remain under pressure.

The market has again failed to push above the old high.  The 14-day RSI (mentioned yesterday) remains high and VIX rose 4% on a day the S&P 5000 was flat. As Guy Adami (CNBC Fast Money) said, “I am not a believer in this market…” for the short term.  There was, however, some good technical news today.  Advancing stocks outpaced decliners with 61% of stocks advanced today and that is a big number for no-change in the S&P 500 index.  It suggests Thursday will be up since the Index usually catches up to breadth if there is an imbalance.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing fell to 59% at the close.  (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-highs minus new-lows) at +146.  (It was +108 Tuesday). The 10-day moving average of change in the spread was +7. In other words, over the last 10-days, on average, the spread has increased by 7 each day. 10-dMA of up-volume is now falling so I judge internals to be neutral due to falling up-volume.

New-high/new-low stats are continuing to stall.  This can indicate a coming reversal (or not).  It doesn’t always work out that way.  Deteriorating internals at the new-high is not encouraging, but it doesn’t guarantee the market will fail here.  We saw about a 3% gain in November 2013 on falling market internal stats.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.

NTSM

The NTSM system remained HOLD today, Wednesday.  The first Sell signal of this cycle was just over 2-weeks ago on 24 January. As noted before, I expect we’ll either get a buy soon, if the market climbs much higher, or market internals will lead the index down.

All NTSM indicators are now neutral.  The 5-10-20 Timer remains neutral as do the Market Internals.

 

MY INVESTED POSITION
I am about 40% invested in stocks because I upped my stock holdings by 10% on 12 February (S&P 500-1819) based on Market Internal signals.  This is a conservative allocation, but putting a bit more into stocks recognizes that the market internals are improving on the S&P 500 and the “correction” may once again confound the bears.  Can you say March? I’ll reassess at the end of the month and add more or pull some out depending on indicators.  The end of the month is Friday so I’ll have to make a decision by then to game the 401k rules.

Consumer Confidence...Worrisome Triple Top Formation with High RSI

CHIEF EQUITY STRATEGIST FOR JP MORGAN SAYS: 'REMAIN BULLISH" (CNBC)
“Ultralow borrowing costs. Pent-up demand. Aging infrastructure. Record consumer wealth levels. JPMorgan Chase's Tom Lee has a long list of reasons to remain bullish on stocks this year.  "To me it's really a formula for stocks to do quite well because it's going to be a story about earnings surprise for the next few years," Lee said Monday on "Squawk on the Street." Story and video at...
http://www.cnbc.com/id/101440520

CONSUMER CONFIDENCE (Briefing.com)

”Consumer confidence improved in January. The Conference Board’s Consumer Confidence Index increased to 80.7 from a downwardly revised 77.5 (from 78.1) in December. The Briefing.com consensus pegged the Consumer Confidence Index at 77.5…Consumption is reliant upon income, not sentiment. As long as the labor situation improves, consumption growth will follow.” Summary and charts at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/conf.htm

MARKET REPORT

Tuesday, the S&P 500 was down 0.1 % to 1845 (rounded).  There was late day selling again today, suggesting the Pros are unsettled.

VIX was down about 4% to 13.67 and that suggests the options players didn’t agree that stocks should be down.    

The yield on the 10-year Treasury Note fell to 2.70% indicating bond buying overall.

The markets seem to be drifting.  I don’t see much in the indicators that say up or down, so for now it’s in a holding pattern.  The biggest worry is the chart of the Index that has stalled around 1848.  If the S&P 500 index can’t get above the old 1848 high, the most likely direction is down.  RSI says the same. 

The 14-day RSI is very high at 86 and it suggesting a short-term top. (“…the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100…RSI is considered overbought when above 70 and oversold when below 30.  More at…http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:relative_strength_in  )

RSI can remain overbought for some time, but a triple top is a bearish technical chart formation.  The S&P 500 needs to break to upside soon, or we should expect a reversal.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing fell to 61% at the close.  (A number above 50% for the 10-day average is generally good news for the market.)   New-highs outpaced new-lows Tuesday, leaving the spread (new-highs minus new-lows) at +108.  (It was +230 Monday). The 10-day moving average of change in the spread was +6. In other words, over the last 10-days, on average, the spread has increased by 6 each day. Up volume fell again on the day, and the 10-dMA is now falling so I judge internals to be neutral due to falling up-volume.
New-high/new-low stats are continuing to stall.  This can indicate a coming reversal (or not).  It doesn’t always work.  Deteriorating internals at the new-high is not encouraging, but it doesn’t guarantee the market will fail here.  We saw about a 3% gain in November 2013 on falling market internal stats.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  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 like 2013.

 

NTSM

The NTSM system remained HOLD today, Tuesday.  The first Sell signal of this cycle was just over 2-weeks ago on 24 January. As noted before, I expect we’ll either get a buy soon, if the market climbs much higher, or market internals will lead the index down.

All NTSM indicators are now neutral.  The 5-10-20 Timer remains neutral as do the Market Internals.

MY INVESTED POSITION

I am about 40% invested in stocks because I upped my stock holdings by 10% on 12 February (S&P 500-1819) based on Market Internal signals.  This is a conservative allocation, but putting a bit more into stocks recognizes that the market internals are improving on the S&P 500 and the “correction” may once again confound the bears.  Can you say March? I’ll reassess at the end of the month and add more or pull some out depending on indicators.  The end of the month is Friday so I’ll have to make a decision by then to game the 401k rules.