“In the bleakest official forecast yet from Moscow, the
Russian central bank warned that the country could see a 4.5 per cent to 4.7
per cent contraction in GDP next year if oil prices remained at $60 a barrel…A
massive Russian recession is baked in the cake. That recession will spill over
into Eastern Europe including the eurozone.” Story at…
http://globaleconomicanalysis.blogspot.com/
Currently the US economy is doing well and lower gasoline
will eventually help us do even better. I worry that the US will have a hard
time keeping growth moving forward if our trading partners are in recession,
assuming Japan and China get there too. Speaking of China…
RUSSIAN DEFAULT (WSJ)
“The oil price is reinforcing the possibility of a
default by Russia. That would have an impact on financial institutions and
economic activity in Europe, and it is making people nervous.”
Actually, the above article was about a number of worries
affecting the stock markets with that one sentence at the end. It seems that Russia may be the biggest worry
regarding the stock market.
CHINA MANUFACTURING IN CONTRACTION (MarketWatch)
China's manufacturing activity appears to be contracting
this month for the first time since May, according to HSBC's preliminary or
"flash" version of its monthly manufacturing Purchasing Managers'
Index, released Tuesday morning. The PMI's headline number fell to a
seven-month low of 49.5…”
HOUSING STARTS
(WSJ)
“Overall housing starts—including apartments and other
multifamily dwellings—fell 1.6% in November to an 1.028 million annual rate,
but have held above 1 million mark for three consecutive months, the Commerce
Department said Tuesday…“We believe that it will be only a matter of time
before the housing recovery shifts up a gear or two and provides a crucial
second wind to the economic recovery,” said Millan Mulraine, deputy head of
U.S. research and strategy at TD Securities.” Story at…
EMPIRE STATE MANUFACTURING CONTRACTS (Advisor
Perspectives)
“[Monday] morning we got the latest Empire State
Manufacturing Survey. The diffusion index for General Business
Conditions contracted for the first time since January 2012, 23 months ago. The
headline number dropped 14 points to -3.58, down from 10.16 last month… Since
this survey only goes back to July of 2001, we only have one complete FALL business
cycle with which to evaluate its usefulness as an indicator for the broader
economy. Following the Great Recession, the index has slipped into contraction
multiple times, as the general trend slowed.” Commentary and charts at…
MARKET REPORT
Tuesday, the S&P 500 was down 0.9% to 1873 (rounded).
VIX was UP about 15% to 23.57.
The yield on the 10-year Treasury Note fell to 2.06.
At mid-day, Tuesday was a statistically significant
up-day. I think the Wall Street computers reacted to the bounce and sold the
rally. The S&P 500 finished with a
statistically-significant down-day. That
would lead to an up day tomorrow (Wednesday) about 62% of the time. (A statistically-significant
day occurs in my system when the size of the day’s move is larger than the
recent normal as measured by standard deviation from the norm.)
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) was 41% at the close Tuesday.
(A number below 50% is usually BAD news for the markets.) New-lows outpaced
New-highs Tuesday.
The spread (new-highs minus new-lows) was minus-397. (It was -331 Monday). The 10-day moving average of change in the
spread was minus-39 . In other words, over the last 10-days, on average, the
spread has decreased by 39-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 and remained
SELL today, Tuesday. VIX, Volume, and Panic indicators are negative. The Price
indicator was negative 3-days ago and Sentiment is currently also a whisker from a negative value.
I am 30% invested in stocks as of 16 Dec based on the
SELL signal Monday. See my post from
yesterday and earlier today for more details.
