“U.S. economic growth slowed sharply in the fourth quarter as weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006. Gross domestic product expanded at a 2.6 percent annual pace after the third quarter's spectacular 5 percent rate…” Story at…
http://www.reuters.com/article/2015/01/30/us-usa-economy-idUSKBN0L30BC20150130
DECLINING EARNINGS ESTIMATES - EARNINGS INSIGHT FROM FACTSET (FactSet)
“Looking at the current quarter (Q1 2015), what are analyst expectations for earnings growth? Is the current streak of eight consecutive quarters of earnings growth expected to continue? The answer is no. This week marked a change in the aggregate expectations of analysts from year-over-year growth in earnings for Q1 2015 to now a year-over-year decline in earnings… With 227 companies in the S&P 500 reporting actual results for Q4 to date, the percentage of companies reporting actual EPS above estimates (80%) is above the 5-year average, while the percentage of companies reporting actual sales above estimates (58%) is slightly below the 5-year average…” Market analysis at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_1.30.15/view
CHICAGO PMI (Briefing.com)
The Chicago PMI increased to 59.4 in January, up from 58.8 in December…The Chicago PMI has little overall economic value, and is only watched by the financial markets because it is usually released one day in advance of the similar national ISM manufacturing survey. A significant move in this regional survey will therefore sometimes be seen as having predictive value for the ISM index.” Story charts at…http://www.briefing.com/Investor/Calendars/Economic/Releases/chi.htm
Doug Short has an in depth discussion of GDP on a PER CAPITA basis that he relates to recession. See his commentary at…
http://www.advisorperspectives.com/dshort/updates/Real-GDP-Per-Capita.php
SENTIMENT APPROACHING THE STRATOSPHERE
I measure sentiment as the percent invested long vs. short {(bulls/(bulls+bears)} in selected Rydex-Guggenheim Funds. Currently my sentiment value is 82%-Bulls on a 5-day moving average basis. This is approaching the extreme levels seen in 2009 at the low when measured by standard deviations from the norm. (I am using the extreme low since the funds I follow were not around in the year 2000, the last time the markets experienced an extreme overvaluation high.) Currently, the sell point for this indicator is 84%. (For perspective, 84%-bulls means that for every 7-investors, 1 is short and the other 6 are betting long. This level of imbalance is a rare event, but it doesn’t always lead to a sell signal overall since sentiment {by itself} is not a good indicator for timing the market.) This is only one indicator, but it does set the stage if other indicators follow with sell signals.
TRADING THIS MARKET (Yahoo Finance)
Range bound markets are teeming with money eating gators just waiting to eat your returns with fees and fear.” Commentary and video at…
http://finance.yahoo.com/news/-s-p-charts-look-better-than-the-day-to-day-noise-130618344.html
Good commentary on trading the current market.
MARKET REPORT
-Friday, the S&P 500 was down about 1.3% to 1995 (rounded).
-VIX was up about 12% to 20.97.
-The yield on the 10-year Treasury Note declined to 1.64% indicating further investor fear.
There was considerable late day selling Friday and the pundits blamed on an oil spike around 2:30PM; a Fed comment from one of the FED Hawks (Fisher) saying rates must rise sooner rather than later (or something like that). Perhaps it was just month-end positioning? Volume was very high at about 50% above normal for the month; it could have been all (or none) of the above.
The S&P 500 closed about 1% above the 200-dMA and slightly below the lower trend line. These have been levels of strong support for a while suggesting “up” from here. Today was a statistically significant day (basically a large down day), also suggesting an up-day for Monday…BUT… Volume was higher than the previous bottom of 15 January indicating a pick-up in selling and hinting that more selling may be in store. Monday may be a critical day for determining short term direction (or not). Sometimes one can get a clear signal on market direction; this isn’t one of those times. My guess is up, but we’ll see.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained 55% at the close Friday. (A number above 50% is usually GOOD news for the markets.) New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +91. (It was +66 Thursday). The 10-day moving average of change in the spread fell to +2. In other words, over the last 10-days, on average, the spread has INCREASED by 2-each day.
Surprisingly, 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 analysis is HOLD. The PRICE indicator is positive; the VIX indicator moved down sharply today and is negative; Sentiment is nearly negative; Volume is neutral. The NTSM analysis is not far from a sell, but with the right market action it could give a buy.
MY INVESTED STOCK POSITION
I remain fully invested at 50% invested in stocks in the
long-term portfolio. 50% is conservative, but appropriate for a retired
guy.
