“U.S. housing starts and permits fell in December after hefty gains the prior month, adding to a raft of weak data that have raised concerns over the health of the economy.” Story at…
http://www.cnbc.com/2016/01/20/us-housing-starts-permits-fall-25-in-december.html
RECESSION AND STOCK MARKET CRASH? – ODDS SAY NO (Financial Sense)
“The US economy is still expanding. The historical odds of a positive annual stock market return outside a recession have been more than 85% in the post-WWII period. Over this same time period, nearly three-fourths of the bear markets occurred during recessions. With few signs of an economic contraction on the horizon, these odds continue to work in investors’ favor.” – Urban Carmel. Commentary at…
http://www.financialsense.com/contributors/urban-carmel/is-bear-market-recession-underway
I tend to provide information both ways. I excerpted the opposite opinion from John Hussman, PhD, in yesterday’s blog so the experts can’t agree. Investors are showing the same level of confusion with rapid up and down movements evident in the stock market. I lean toward pessimism.
HOW FAR WILL IT FALL? AT LEAST THIS FAR
…around 1600, or so say the chartists on a trader blog I
visit. The scary possibility is that it could bottom around 1000 or even at the
prior lows around 800. MARKET REPORT / ANALYSIS
-Wednesday, the S&P 500 was down about 1.2% to 1859 at the close. (At one point around mid-day the S&P 500 was down nearly 4%.)
-VIX rose about 6% to 27.57.
-The yield on the 10-year Treasury dropped to 1.98%
“As an investor, you should remember that making money in the market is only one-half of the job. Keeping it is the other.” – Lance Roberts
We reached market extremes Wednesday that are often associated with capitulation bottoms. Around mid-day there were only about 3% of stocks advancing with up-volume of around 3 or 4% of the total-volume. There is a problem though; the low-low values did not last all day; the market bounced about mid-day finishing with weak internals, but not numbers that would indicate a bottom. In a real panic selloff, the internals close an extreme low values because the panic doesn’t let up. That didn’t happen Wednesday so expect more trouble ahead.
The S&P 500 finally tested the 25 August low of 1868 on the S&P 500. Today’s close was 1859. We may follow-thru on the bounce that appears to have started today, but conditions at the close did not indicate that selling has created a durable bottom.
Wednesday was NOT a statistically significant day in my system, but the tendency of the market to bounce after big moves is widely known. With a 1.2% drop on the S&P 500 Friday at the close (and a huge down day mid-day), a bounce up Thursday looks likely.
In a true bear market, rallies can end in a few days so I’ll need to be careful trading it.
All market measures that I follow are oversold.
SHORT-TERM TRADING
I held onto the QLD position. At one point I was down over 7%; then up 1%; only to finish about flat. I thought there might be a reversal (as I predicted yesterday), but I didn’t expect the wild ride along the way. I am still long QLD in the trading portfolio that focuses on short-term moves. (I am 100% cash in the long-term portfolio. That is not a great idea unless I am right on timing re-entry, but I do sleep well.)
MARKET INTERNALS (NYSE DATA)
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 31.2% Wednesday vs. 34.2% Tuesday. (A number below 50% is usually BAD news for the markets. On a longer term, the 150-day moving average of advancing stocks dropped to 48.1%. A value below 50% indicates a down trend. The McClellan Oscillator (a Breadth measure) declined and remained negative.
New-lows outpaced New-highs again. The spread (new-highs minus new-lows) was minus-1391. (It was -694 Tuesday.) The 10-day moving average of the change in spread was -140 Wednesday. In other words, over the last 10-days, on average; the spread has DECREASED by 140 each day. Market Internals switched to negative on the markets.
NTSM
Wednesday the Price, VIX & Volume indicators were negative. The Sentiment indicator was neutral. The long-term NTSM indicator is SELL; the first sell this cycle was 18 December and there has not been a BUY since. I am expecting a Bounce up so this may not be a great time to sell. Wait for a bounce and “sell the rally”.
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). Friday, 15 Jan I reduced stock allocation to zero in long-term accounts. That leaves 100% invested in cash yielding about 2%. Short-term bonds would be OK too.
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 8-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html
