Industrial production increased 1.3% in November after increasing an upwardly revised 0.1% (from -0.1%) in October.” Details at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/indprd.htm
OIL FALLS AGAIN (CNBC)
“Crude prices came under renewed pressure on Monday, and Brent hit five-year lows of nearly $60 a barrel after producer group the Organization of the Petroleum Exporting Countries said it would stick to its decision not to cut output despite fears of a world awash in oil.” Story at…
http://www.cnbc.com/id/102267376
WHAT ABOUT COPPER?
While everyone focuses on oil and asks the question, “Why oil is falling?” there is another perhaps more important question: “Why is Copper falling?” Copper is used many products from vehicles to buildings so it is often used to gauge the health of the world’s economy. “Dr. Copper” has a PhD in economy, so they say. Dr. Copper is concerned. Copper has fallen 33% since late July. If falling oil price is just an oversupply problem, why is copper collapsing too? The world’s economy may be in trouble, but surprisingly, it may be good for the US. See below…
U.S. ECONOMIC AND MARKET REVIEW – DECEMBER 2014 (Silvercrest Asset Management Group)
“The slowdown in China’s investment boom has undercut global oil prices, along with other industrial commodities such as iron ore (down -48% so far this year) and copper (down -16%)…[This] ultimately stands to benefit the U.S. economy…cheaper prices for energy and other inputs translate into lower costs for U.S. companies and greater purchasing power for U.S. consumers, as well as reduced inflationary pressure.” Interesting short read on the US economy at…
http://www.silvercrestgroup.com/uploads/viewFile/5481fd77-ff28-4fb6-9701-3db4c0a864b8/Economic%20Market%20Review%20December%202014.pdf
HUSSMAN’S VIEW OF THE CURRENT EQUITY MARKET WEAKNESS (Hussman Funds)
“My impression is that the weakness we’ve observed in the equity market and the plunge in Treasury yields has not been “caused” by weakness in the energy market, but that all are symptoms of a broader softening in global economic growth, most evident in Japan and Europe, but increasingly developing in England and China, among other places. In U.S. data, we don’t observe evidence of recession risks at present, but that evidence can emerge fairly rapidly. A large-scale credit event would obviously heighten our immediate economic concerns. Presently, we’re more focused on clear upward pressure on credit spreads and risk premiums…if credit spreads are widening and internal uniformity is deteriorating, one can infer that investors are shifting toward risk aversion. In that environment, safe, low-interest liquidity is no longer an inferior asset but a desirable one, and creating more of the stuff is not reliably supportive to risky asset prices. This is borne out across a century of history, including the 2000-2002 and 2007-2009 declines, and can be observed even in several episodes since 2009.” John Hussman, PhD. Weekly Market Commentary from…
http://www.hussmanfunds.com/wmc/wmc141215.htm
WHAT TO WATCH THIS WEEK – IT’S SIMPLE (Yahoo Finance)
The markets must close above 2000.
Fed Ex must meet or beat expectations. Commentary at… http://finance.yahoo.com/news/what-to-watch-during-the-last-most-important-trading-days-of-2014--124234201.html
MARKET REPORT
Monday, the S&P 500 was DOWN 0.6% to 1890 (rounded).
VIX was DOWN about 3% to 20.42.
The yield on the 10-year Treasury Note rose to 2.12.
While the %-loss for oil was larger than the S&P 500 (1.7% vs. 0.6% respectively), the Index did mirror the fall in oil price. Oil fell below 60 mid-day and recovered to settle at 60 on its close. Art Cashin commented that 60 was a critical level for the markets.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 43% at the close Monday. (A number below 50% is usually BAD news for the markets.) New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-331. (It was -308 Friday). The 10-day moving average of change in the spread was minus-22. In other words, over the last 10-days, on average, the spread has decreased by 22-each day.
Internals remained 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.
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 long-term NTSM system analysis switched to SELL Monday, based on negative values for the panic indicator and the Volume indicator which is a variant of “on-balance-volume.” The Price indicator was negative yesterday and Sentiment is a whisker from sell. If VIX rises 2% tomorrow, it would trigger a sell for the VIX indicator too.
I can’t say with any certainty that selling is the right move now. The Index is only 2% above the 200-day moving average; RSI is now “oversold; the Holiday season is starting and that is usually a bullish time for the markets, but…
…I am going to follow my indicators unless tomorrow turns out to be a big down day. In that case I might delay selling on the assumption that a big down day (>1% down) would suggest an up day to follow. This is the Fifth “Sell” signal this year and that is disappointing considering that most of the signals have been false sells.
I am probably currently closer to 45% invested, but I will move to 30% invested tomorrow, Tuesday, unless Tuesday is a large down day, i.e. greater than 1% down. I’ll try to post in the blog before noon, but I may not be able to due to other commitments.
