“A stock market correction is approaching the level of near certainty as Wall Street faces a major paradigm shift in how to achieve price gains, according to a Goldman Sachs analysis. In a market outlook that garnered significant attention from traders Monday, the firm's strategists called the S&P 500 valuation "lofty by almost any measure" and attached a 67 percent probability to the chance that the market would fall by 10 percent or more, which is the technical yardstick for a correction…"We forecast a modest price gain of roughly 3 percent to our year-end 2014 target of 1900." Full story and video at…
http://www.cnbc.com/id/101331228
DOES GOLDMAN MATTER? (DOES THE PIZZA DELIVERY GUY WAIT TO
BE PAID?)
In March of 2000, Abie Joseph Cohen, the managing
director and chair of the Investment Policy Committee of Goldman Sachs, cut
stock allocation recommendations from 70% to 65% and, more importantly, warned clients
to avoid technology. That was the
stake-in-the-heart for the markets and marked the beginning of the 2000 Bear
Market. When the big Wall Street
investment banks start telling their clients not to buy, expect trouble. CNBC reported on this at 10:30AM; the S&P
500 was at its high for the day and began falling immediately. ZeroHedge had noted the Goldman report at
7:50AM (and we can presume the pros had the report much earlier), so it isn’t a sure thing that market problems were due to the Goldman
call. How do you get a banjo player off your porch? Pay him for the pizza!
EARNINGS TAKE CENTER STAGE (Reuters)
“After the S&P 500's impressive 30 percent return in 2013, Wall Street will get a better picture of reality next week as the pace of companies reporting earnings picks up. A number of big banks are due to report their quarterly and full-year results next week…
…Their results will help determine whether earnings forecasts for 2014 need to come down and whether stock values have become overblown. "There isn't much left to happen to this market, in terms of the view of an expanding economy. It is generally agreed by everyone that the economy is improving. What isn't clear is whether earnings are improving at the same pace the market is. That's the next big test for equities," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.” Full story at…
http://www.reuters.com/article/2014/01/11/us-usa-stocks-weekahead-idUSBREA091C720140111
STRANGE NON-FARM PAYROLLS (EMPLOYMENT) REPORT (Advisor Perspectives)
Doug Short covered the payroll report in detail for those who wish to get
the full story on employment. The one
sentence that stood out for me follows: “For a broader context of the post-recession recovery, it's instructive to consider the monthly averages of the calendar years: Nonfarm Employment averaged -79.0K new jobs in 2010, 132.4K in 2011, 186.4K in 2012 and 182.5K in 2013.” Extensive analysis and commentary at…
http://advisorperspectives.com/dshort/updates/Big-Four-Economic-Indicators.php
The above yearly summary shows that new-jobs haven’t kept up with population growth. I remember about 200k is required just for people coming into the workforce. The only good news would be that now that the boomers are retiring, conditions should be better for those looking for work.
COMPARE THE 1966 BEAR MARKET TO THE CURRENT BEAR MARKET -
UPDATED
I’ve updated the Page comparing the 1966-1982 Bear market
to the S&P 500 from its 2000 high at the right side of this blog. Correlations don’t look impressive now that
the S&P 500 has broken its old highs.
I just want to remind folks that the 1966 Bear lasted roughly 16 years
and the current bear is about 13-years old. Since the S&P 500 has now passed
the old highs (around 1550) many are saying the bear market is over. You can make that case, and by definition, it
is over for the S&P 500. We must remember that the Dow breached its old
high in 2006 and climbed nearly 30% above its prior high in 2007 and many said
the Bear market was over then…right before the 2007 crash.
MARKET REPORT
Monday, the S&P 500 fell 1.3% to 1819 (rounded). VIX was UP about 9% to 13.28.
-The 10-year Treasury Note was unchanged at 2.83% yield. Rates at 3% or above are considered by some traders to be “trouble-for-stocks”.
-Today was a statistically significant day in price/volume
and those days are followed by a reversal about 60% of the time so an up-day is
favored for tomorrow. The S&P 500 is near the lower trend line
and the index is only 1% above its 50-day moving average.
The VIX suggests that option players woke up today, but are not yet panicked.
Based on recent history a short-term bounce up is
expected.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 52%
at the close Monday. (A number above 50%
for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Monday, leaving
the spread (new-hi minus new-low) at +118 (it was +195 Friday). The 10-day moving average of change in the
spread was minus 6. In other words, over the last 10-days, on average, the
spread has decreased by 6 each day. Again,
the negative change in daily spread kept the market internals flat and overall,
market internals remained neutral on the market. 
Market Internals are a decent trend-following analysis of current market action, but in 2013, if I had been buying the positive ratings and selling negative ratings I would have under-performed a buy-and-hold strategy.
NTSM
The four areas of analysis, Sentiment, Price, Volume and
VIX haven’t changed and are currently rated as follows:Sentiment remains screaming high at 82%-bulls (5-dMA of selected Rydex/Guggenheim funds) and that’s a negative; Price is positive since up-days have been larger than down-days over the past month; VIX and Volume remain neutral.
The most recent BUY signal for the NTSM system was 25
October. The “5-10-20 Timer” switched to
BUY from HOLD on 18 December.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December (S&P 500-1540) because I upped my stock holdings by 10% on the 20th of December. Unless I get a SELL signal in the NTSM system, I will continue to income-average (a little each month) into the stocks to get my %-invested up to around 50% (max for me now) unless there is a correction that would allow me to move in sooner and at a higher percentage. Since that is my expectation, I have not upped my invested percentage in one move as I normally would.
