“What Citigroup Inc.’s Ebrahim Rahbari termed “Grexit” is back in play and it remains the worst possible outcome in the view of economists at Berenberg Bank and ING-DiBa AG…After Greece, speculators would immediately size up the next potential victim -- from Cyprus to Spain and on to Italy…’It would be a nasty precedent if Greece leaves as it could stimulate others to do the same, making it the first step of euro fragmentation,’ said Carsten Brzeski, chief economist at ING-DiBa in Frankfurt. ‘The fact remains that losing one member of the family would ultimately open Pandora’s box.’” Story at…
http://www.bloomberg.com/news/2015-01-05/greek-euro-exit-risk-revived-as-merkel-bluff-overlooks-contagion.html
Markets don’t like uncertainty so Greece issues suggest issues ahead.
OIL FALLS AGAIN (Yahoo Finance)
“The price of oil started the first full week of 2015 the way it ended the previous year: heading downwards with analysts from two different investment banks weighing on the commodity by cutting yearly forecasts…it was an analyst note from Citi that set the tone for the week, signaling ‘trouble ahead in 2015.’ ‘Three massive factors have come to a head as 2015 opens: the U.S. shale revolution, the Saudi refusal to cede market share to other producers and a weak world economy,’ a team, led by Edward Morse, said in the note released on Monday morning. Citi predicts the price of Brent would average around $63 a barrel in 2015…” Story at…
http://finance.yahoo.com/news/oil-falls-again-wall-street-140209348.html
EUROPEAN DEFLATION (Global Economic Analysis)
“Deflation is once again nearly at hand, but Europe will be first.” Commentary at…
http://globaleconomicanalysis.blogspot.com/2014/01/deflation-will-return-europe-first-then.html
DECEMBER PREDICTS A CRASH? (MarketWatch)
“…2014 was the third weakest December on record since the turn of the century and only 2007 and 2002 were weaker than 2014…there is a striking coincidence for anyone who is paying close attention. The percentage change from the highest value to the ending value is where that observation can be made. Take a look at the three years that were weaker than 2014 and you'll see that 2007, 2000, and 2004 were weaker than 2014 in terms of their change from highest recovery value to ending value…If history repeats itself, we cannot be sure if it will, the market is poised to crash. Commentary and analysis at…
http://www.marketwatch.com/story/quant-work-suggests-a-stock-market-crash-is-looming-2015-01-02?dist=tbeforebell
DANGER! DANGER! MARGIN DEBT AT ALL TIME HIGHS RELATIVE TO GDP (CNBC)
Source: http://www.cross-currents.net/
Margin Debt Story at…
http://www.cnbc.com/id/102303708
Note that the prior margin-debt peaks were in 2000 and 2007…at the highs for the major Indices. High margin debt is not a good sign, but it doesn’t mean a collapse is necessarily near.
MARKET REPORT
Monday, the S&P 500 was down about 1.8% to 2021 (rounded).
VIX was up about 13% to 20.17.
The yield on the 10-year Treasury Note fell to 2.04% as investors sold risk and bought Treasuries.
US Markets followed Europe down so I suspect the market was worried about Greece possibly leaving the Eurozone and the stronger dollar rather than the drop in oil. I think falling oil is good news; Janet Yellen said that in December and the markets (that had been in free fall) turned and rallied strongly.
Today was a big down day and that is often followed by an up-day, but Relative Strength is not overbought so I suspect the market will fall further.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 57% at the close Monday. (A number above 50% is usually GOOD news for the markets.) New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus -4. (It was +63 Friday). The 10-day moving average of change in the spread was minus -17. In other words, over the last 10-days, on average, the spread has INCREASED by 17 each day.
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
Monday, the long-term NTSM system analysis switched to HOLD. VIX exploded to the upside today. VIX is negative; other indicators are neutral, but all deteriorated.
I have tightened up on criteria for sell signals in hopes that the NTSM will avoid false sell signals that were prevalent in 2013. There were 4 false sells and one accurate sell signal in 2013. I expect the NTSM system to do better in 2015 since QE has ended and this system was built during a period of higher volatility.
MY INVESTED STOCK POSITION
I remain fully invested at 50% invested in stocks. 50% is
conservative, but appropriate for a retired guy.
