GDP Growth Stalls – Don’t Worry; Be Happy…Fed Taper…Chicago PMI

GDP – GROWTH STALLS (Reuters)
“The U.S. economy barely grew in the first quarter as exports tumbled and businesses accumulated stocks at the slowest pace in nearly a year, but activity already appears to be bouncing back.  Gross domestic product expanded at a 0.1 percent annual rate, the slowest since the fourth quarter of 2012, the Commerce Department said on Wednesday... "This weakness is not carrying through the second quarter," said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh.” Story at…
http://www.reuters.com/article/2014/04/30/us-usa-economy-idUSBREA3T03420140430?feedType=RSS&feedName=businessNews

FED: GROWTH HAS PICKED UP; TAPER TO CONTINUE (Bloomberg)

“Growth in economic activity has picked up recently, after having slowed sharply,” the Federal Open Market Committee said today in a statement following a meeting in Washington. “Household spending appears to be rising more quickly.”  The committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.” Story at…
http://www.bloomberg.com/news/2014-04-30/fed-says-economy-has-picked-up-as-it-trims-bond-buying-further.html
 
One reason why economists aren’t worried about the poor GDP number:

CHICAGO PMI REBOUNDS (Briefing.com)

“Manufacturing activities in the Chicago region rebounded in April. The Chicago PMI increased to 63.0 from 55.9 in March. That was the strongest reading since the index reached 66.6 in October.”  Full story at...
http://www.briefing.com/Investor/Calendars/Economic/Releases/chi.htm
Chicago PMI may predict the ISM manufacturing number due tomorrow, so “Don’t worry; Be Happy”.
 
MARKET REPORT

Wednesday, the S&P 500 was UP about 0.3% to 1884 (rounded).

VIX was DOWN about 2% to 13.41.
The yield on the 10-year Treasury Note fell slightly to 2.65% at the close.
 

The Bond Ghouls still have concerns about the stock market.

 

I’m going to leave this posted until the S&P 500 breaks thru the old highs: The S&P 500 has closed in the vicinity of 1880 about 8 to 10 times since 31 December.  The index has only closed above 1880 3-times and then only about ½-% higher.  It needs to punch higher or the correction will be back.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE increased to 58% 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.  The spread (new-highs minus new-lows was +66.  (It was +83 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. The smoothed 10-dMA of up-volume continued up today.  The internals remained positive 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. 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 analytical model for LONG-TERM MONEY remained HOLD Wednesday, but another indicator tripped to negative.  Sentiment climbed to 83%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. This is a very high number and on a statistical basis Sentiment is now negative.  Price is also negative since the up-moves have been significantly smaller than the down-moves over the last month. VIX & Volume indicators are neutral.

MY INVESTED POSITION

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.

Consumer Confidence…Overvaluation…Presidential Cycle

CONSUMER CONFIDENCE FALLS SLIGHTLY (Bloomberg)
“Confidence among U.S. consumers declined [slightly] in April from a six-year high as Americans became less enthusiastic about the economy and labor market.”  Story at…
http://www.bloomberg.com/news/2014-04-29/consumer-confidence-index-in-u-s-decreased-to-82-3-in-april.html

ALL FINANCIAL ASSETS OVERVALUED (CNBC)

"The quantitative easing and the excess money and the low interest rates have driven pricing up of almost all financial assets to beyond what their intrinsic value might be," Joshua Harris, co-founder and chief investment officer of $161 billion private equity firm Apollo Global Management, said Monday at the Milken Institute's Global Conference in Los Angeles.” Story at…
http://www.cnbc.com/id/101620735

PRESIDENTIAL CYCLE – WE’RE IN THE MID-TERM YEAR (Marketwatch)

"Stephen Suttmeier, technical research analyst at Bank of America Merrill Lynch… points out there’s a more than 23% chance of the broader stock market shedding a fifth of its value sometime before October…‘The Mid-term year has a higher-than-average risk of a pullback of 20% or more during the 6-month periods beginning in January through August, especially during the March-August and April-September periods.’" – Wallace Witkowski, “The Tell” at…

http://blogs.marketwatch.com/thetell/2014/04/29/risk-of-20-stock-correction-highest-until-october-b-of-a-s-suttmeier/

GARTMAN OUT OF THE MARKET AGAIN (CNBC)

“Dennis Gartman, editor of The Gartman Letter, is…starting out this week back on the sidelines. ‘I do not like switching back and forth. It's not fun,’ he said on CNBC's ‘Fast Money.’ ‘I would rather be consistently bullish. It's still a bull market and the worst that I'll become is neutral of stocks.’" Story at…
http://www.cnbc.com/id/101621370

MARKET REPORT

Tuesday, the S&P 500 was UP about 0.5% to 1878 (rounded).

VIX was DOWN about 2% to 13.71.

The yield on the 10-year Treasury Note fell slightly to 2.69% at the close.

The Bond Ghouls still seem to have concerns about the stock market.

 

I’m going to leave this posted until the S&P 500 breaks thru the old highs: The S&P 500 has closed in the vicinity of 1880 about 8 to 10 times since 31 December.  The index has only closed above 1880 3-times and then only about ½-% higher.  It needs to punch higher or the correction will be back.

 
MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE decreased to 57% 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.  The spread (new-highs minus new-lows was +83.  (It was +42 Monday.) 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. The smoothed 10-dMA of up-volume increased today.  The internals remained positive 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. 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 analytical model for LONG-TERM MONEY remained HOLD Tuesday.  Sentiment climbed to 81%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. This is a very high number and on a statistical basis Sentiment is now negative.  The VIX, Price & Volume indicators are all neutral.

MY INVESTED POSITION

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.

Revenues Remain Weak…Valuation is High…Fed Meeting this Week

FACTSET EXCERPT (Factset)
“With 48% of the companies in the S&P 500 reporting actual results for Q1 to date, the percentage of companies reporting EPS above estimates is in-line with recent historical averages, while the percentage of companies reporting revenue above estimates is below recent historical averages.”  Report at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.25.14/view
The earnings are in-line with analyst estimates, but revenues continue to lag.  The question remains, “How much longer will investors live with poor revenue growth?”  At some point, companies will no longer be able to grow earnings thru efficiency improvements.  That’s been a broken record so far.
 
THE FUTURE IS NOW (Hussman Funds)
“The median price/revenue multiple for S&P 500 constituents is now higher than at the 2000 market peak. The average price/revenue multiple across S&P 500 constituents is now above every point in that bubble except the first and third quarters of 2000. The central message to investors with unhedged equity positions and investment horizons shorter than about 7 years: Prospective returns have reached zero. The value you seek from selling in the future is already on the table today. The future is now.” - John Hussman, Ph.D. Excerpted from the 28 April Weekly Market Commentary, Hussman Funds at…
http://www.hussmanfunds.com/

FED MEETING THIS WEEK MATTERS (CNBC)
The Federal Reserve releases its next policy statement on Wednesday. And with nervousness about the future of the federal funds rate mounting, investors will certainly be watching intently.”  Story at…
http://www.cnbc.com/id/101603891
It is expected that the Fed will continue reducing its bond buying.  This will be the third installment of “Tapering.”  Will investors see “three-steps-and-a-stumble” in the stock market?  That’s the rule that predicts poor market returns after three Fed tightenings.
 
TO WHOM DOES THE US OWE MONEY (Craig Eyermann)
“The biggest surprise...is the appearance of Belgium on the list, which jumped ahead of several other nations by more than doubling the amount that is being lent to the U.S. government from the small European nation over the last six months. Since Belgium is a major international banking center, what this really represents is the accumulation of U.S. debt by other foreign entities through Belgium's banks in much the same way as London's banks have historically served this role for countries such as China. Here though, it appears that Russia-based interests may be behind the apparent surge in the nation's holdings of U.S. government-issued debt, with the driving factor being the desire to avoid losing access to the holdings from economic sanctions. Much of the increase in holdings through Belgium took place in the several months preceding Russia's 23 February 2014 actions to seize control of the Crimea peninsula from Ukraine, which indicates the very premeditated nature of the action.” Craig Eyermann posted at Advisor Perspectives at…
http://www.advisorperspectives.com/dshort/guest/Craig-Eyermann-140425-US-Government-Creditors.php
The article at dShort.com included a chart with all of the debt holders.  Federal employees will note that 20% of the US debt is owed to the Civil Service Retirement System and Social Security System.  A “fix” of the national debt (at some future point) will probably include screwing Federal Employees even though they paid 7% into the CSRS while everyone else paid 1% into Social Security (40-years ago) and continuing thereafter.
 
INTERNET EXPLORER BUG (CNBC)
“A large portion of the world's browsers are vulnerable to attack from a flaw discovered in versions of Internet Explorer, Re/code reported. The flaw, disclosed Saturday by Microsoft is a "Zero Day" vulnerability…The flaw affects Microsoft's Internet Explorer 6 through 11.” Story at...
http://www.cnbc.com/id/101617715
Let’s hope MS fixes this this when they push out the updates on the second Tuesday of the month or better still…sooner!

MARKET REPORT

Monday, the S&P 500 was UP about 0.3% to 1869 (rounded).
VIX was DOWN about 0.6% to 13.97.
The yield on the 10-year Treasury Note fell slightly to 2.70% at the close.
 
The Bond Ghouls still have concerns about the stock market, but perhaps some money flowed back into stocks today.
 
This is an odd day.  Only 45% of stocks advanced on the NYSE, but the S&P 500 was up.  Usually, that portends a down day as the Index tends to follow the majority the next day.   On the other hand, Market Internals were up today on a 10-day basis and this trend usually holds for a few days at least.  So tomorrow is anybody’s guess.
 
Repeating: The S&P 500 has closed in the vicinity of 1880 about 8 to 10 times since 31 December.  The index has only closed above 1880 3-times and then only about ½-% higher.  It needs to punch higher or the correction will be back.

MARKET INTERNALS (NYSE DATA)

The 10-day moving average of stocks advancing on the NYSE increased to 58% at the close.  (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Monday.  The spread (new-highs minus new-lows was +42.  (It was +35 Friday.) 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 7 each day. The smoothed 10-dMA of up-volume increased today.  The internals switched to positive 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. 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 analytical model for LONG-TERM MONEY remained HOLD Monday.  Sentiment climbed to 80%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. This is a very high number, but on a statistical basis Sentiment is now neutral.  It wouldn’t take much for sentiment to issue a sell signal.  The VIX, Price & Volume indicators are all neutral.

MY INVESTED POSITION

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.