Slow and Steady Growth of your Investment Portfolio
PREDICTABLE INVESTING - CURRENT OUTLOOK PAGE CURRENT STOCK MARKET OUTLOOK
WEEKLY UPDATE – July 23, 2010
LATEST MARKET OUTLOOK
MARKET INDICES:
INDEX
VALUE %CHANGE
S&P500=
1,102.66
+3.55
DJIA=
10,424.62
+3.24
Nasdaq=
2,269.47
+4.15
INDICATORS: THIS
WEEK LAST WEEK STATUS
1. Treasury Yield Slope (%) = +3.65 +3.59+ 2. Fwd PE Ratio = 15.75 15.21+
3. Put/Call Ratio (PCR) = 0.93
0.97 +
4. Real GDP (Annual % growth) = 2.7 3.0+
5. Core CPI (Annual % growth) = 1.7
1.7+ LTTSSignal BUY
CURRENT ADVICE:
1. 5 out of 5 indicators are positive. The Long
Term Trend Signal (LTTS) is POSITIVE. The long-term outlook for the market is also positive.
2. The PI model is a BUY,
andnew money destined for the stock
portion of your asset allocationcan
be Dollar Cost Averaged into the market.
DISCUSSION: 1. Robust
earnings reports, the passage of the Financial Reform bill, and favorable bank
reports from Europe caused a positive week for the market. The S&P500 rose
by +3.55% closing at 1,102.66, while the DJIA was +3.24% higher, closing at 10,424.62.
The NASDAQ rose by +4.15%, and ended at 2,269.47. The overall multi-month S&P500 is up a large
+63.04% since the low of 676.53 on March 9, 2009.We
are also -29.55% below the market peak of 1,565.15 set on October 9th 2007.
2. Corporate earnings for the
second quarter have been handily beating expectations, showing that consumers
and companies are spending and buying goods and capital equipment. Contrast
that to the poor economic reports in housing, exports, and the dismal job
growth and high unemployment numbers. These two trends are at odds with
economists fiercely debating whether the economy will continue to grow, albeit
slowly, or fall back into a double-dip recession. The market is also displaying
this schizophrenic personality, jumping higher on high corporate earnings and
tanking on poor economic news. This will continue until the primary direction
becomes clear.
3.Fed chief Ben Bernanke said to Congress that
“the economic outlook was unusually uncertain” and that the central bank is “prepared
to take further policy actions if the US economy doesn’t continue to improve”. Economists
expect the second quarter GDP to slow to 2.5% YOY growth rate, down from the
2.7% for the first quarter. Slow job growth and subdued inflation is expected
to continue, which allows the Fed to maintain its very low interest rate
policy. Companies are sitting on large amounts of cash, and are unwilling to hire
new workers before they see signs that the economy is headed out of recession.
4. The
market jumped higher, closing at 1,102.66, which is much higher than the previous
resistance level of 1,063.11. The next higher overhead resistance level is at 1,117.51.
The PCR peaked at a multi-month high of 1.08 on 5/28, corresponding to the low
for the market, and then started to pull back. It is now drifting downward at a
faster rate, and closed the week at 0.93. This peaking of the PCR and
subsequent pullback played out in classic fashion and we can now declare that a
bottom was established on July 2. This sequence of events is charted and described in the
“members only” Latest Data Page (Sign Up for FREE membership).
5. The LTTS signal turned firmly positive last week after being stuck in
neutral for the last few weeks. The PI model is now back to a BUY and a clear
trend up seems to be the predominant direction. Please beware that the extreme
volatility we are seeing can reverse this trend in just a few sessions. Meanwhile, diversify assets between equities and fixed
income as repeatedly advocated by us. Join our FREE membership to receive
special bulletins, advance warning of optimal entry points for the market, and
analysis of financial news.
6. Both Short-term and Long-Term treasury interest rates rose slightly this
week. The 3 month T-bill rose from 0.15% to 0.16%, while the 30 year long
T-bond rose from 3.95% to 4.01%. Home mortgage rates were unchanged, with the national
average 30 year fixed rate at 4.80%. The slope of the Yield curve rose, and
remains at a very high 3.65%. The corresponding Recession Probability Index
(the likelihood of a future recession
in the next 12 months) is at 0%. The “Current Recession Indicator”, the likelihood that we
are still in a recession, remains at 100%.
5out of 5 indicators
are positive, the LTTS is POSITIVE,
and the overall model continues in aBUY
mode.
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WEEKLY UPDATE – July 16, 2010
LATEST MARKET OUTLOOK
MARKET INDICES:
INDEX
VALUE %CHANGE
S&P500=
1,064.88
-1.21
DJIA=
10,097.90
-0.98
Nasdaq=
2,179.05
-0.79
INDICATORS: THIS
WEEK LAST WEEK STATUS
1. Treasury Yield Slope (%) = +3.59 +3.69+ 2. Fwd PE Ratio = 15.21 15.39+
3. Put/Call Ratio (PCR) = 0.97
0.98 +
4. Real GDP (Annual % growth) = 2.7 3.0+
5. Core CPI (Annual % growth) = 1.7
1.7+ LTTSSignal NEUTRAL
CURRENT ADVICE:
1. 5 out of 5 indicators are positive. The Long
Term Trend Signal (LTTS) is NEUTRAL. The long-term outlook is also neutral, and we are on
HOLD.
2. The PI model is a HOLD,
andnew money destined for the stock
portion of your asset allocationshould
be held in Money Market Funds.
DISCUSSION: 1. Economic data
showing a very slow recovery and poor consumer sentiment numbers drove the stock
market lower. The S&P500 fell by -1.21% closing at 1,064.88 while the DJIA was
-0.98% lower closing at 10,097.90. The NASDAQ fell by -0.79%, and ended at 2,179.05.
The overall multi-month
S&P500 is still up a large +58.40% since the low of 676.53 on March 9th,
2009.We are also -31.96% below the market peak of 1,565.15 set
on October 9th 2007.
2. The week started strong,
with increased earnings and upbeat forecasts from Alcoa and Intel, but by the
end of the week the gains had all evaporated. Financials took a beating after
Bank America reported a decline in trading profits and a loss in its mortgage
business, and its stock dropped -9.16%. Citigroup (stock down -6.25%) and GE (down
-4.59%) posted mediocre results, and these lackluster revenue numbers are
causing investors to worry about whether economic growth is flattening out. The
Nasdaq also dropped weighed down by disappointing earnings from Google, and its
stock cratered by -6.79%.
3.The U of Michigan’s Consumer Sentiment gauge plummeted
to 66.5 from 76.0 as consumers fretted about the slowly recovering economy and
anemic growth in jobs. A 9.5 point drop is of the same order as that following
the 911 terrorist attacks and other major events such as the collapse of Lehman
Brothers. Such a huge drop in sentiment usually follows a big shock or event,
and it is remarkable that this huge decline came about with no precipitating
event. The overriding question is whether this large drop in the consumer
sentiment is forecasting a major slowdown in consumer spending this summer.
4. The market closed lower and is still
barely above the previous resistance level of 1,063.11. The PCR peaked at a
multi-month high of 1.08 on 5/28, and then started to pull back. It is now drifting
downward at a faster rate, and closed the week at 0.97. This peaking of the PCR
and subsequent pullback is playing out in classic fashion as we wait to see if
a clear bottom was established on July 2, or if the decline will continue. This sequence
of events is charted and described in the “members only” Latest Data Page (Sign Up for FREE
membership).
5. The LTTS signal has been oscillating between a small positive and a small
negative number for the last few weeks. This is normal behavior at market
inflection points where a fierce struggle ensues between the bulls and the
bears, each of whom is trying to take control of the market direction. The PI
model remains a NEUTRAL value while we wait to see who wins and a clear trend
up or down is established. Meanwhile,
diversify assets between equities and fixed income as repeatedly advocated by
us. Join
our FREE membership to receive special bulletins, advance warning of optimal
entry points for the market, and analysis of financial news.
6. Short-term treasury interest rates fell slightly this week, and
long-term rates also fell. The 3 month T-bill fell from 0.16% to 0.15%, while
the 30 year long T-bond fell from 4.04% to 3.95%. Home mortgage rates were
unchanged, with the national average 30 year fixed rate at 4.80%. The slope of
the Yield curve fell, and remains at a very high 3.59%. The corresponding
Recession Probability Index (the likelihood of a future recession in the next 12 months) is at 0%. The “Current Recession
Indicator”, the likelihood that we are still in a recession, remains at 100%.
5out of 5 indicators
are positive, the LTTS is NEUTRAL,
and the overall model continues in aHOLD
mode.
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WEEKLY UPDATE – July 9, 2010
LATEST MARKET OUTLOOK
MARKET INDICES:
INDEX
VALUE %CHANGE
S&P500=
1,077.96
+5.42
DJIA=
10,198.03
+5.28
Nasdaq=
2,196.45
+5.00
INDICATORS: THIS
WEEK LAST WEEK STATUS
1. Treasury Yield Slope (%) = +3.69 +3.60+ 2. Fwd PE Ratio = 15.39 14.61+
3. Put/Call Ratio (PCR) = 0.98
1.02 +
4. Real GDP (Annual % growth) = 2.7 3.0+
5. Core CPI (Annual % growth) = 1.7
1.7+ LTTSSignal NEUTRAL
CURRENT ADVICE:
1. 5 out of 5 indicators are positive. The Long
Term Trend Signal (LTTS) is NEUTRAL. The long-term outlook is also neutral, and we are on
HOLD.
2. The PI model is a HOLD,
andnew money destined for the stock
portion of your asset allocationshould
be held in Money Market Funds.
DISCUSSION: 1. Optimism
about higher corporate earnings and recovery from a very oversold market drove
stock higher. The S&P500 rose by +5.42% closing at 1,077.96, while the DJIA
was +5.28% higher closing at 10,198.03. The NASDAQ rose by +5.00%, and ended at
2,196.45. The
overall multi-month S&P500 is still up a large +59.34% since the low of
676.53 on March 9, 2009.We are also -31.13% below the market
peak of 1,565.15 set on October 9th 2007.
2. Google announced that its operating
license in China was renewed, and its shares jumped +7.09% this week, while
Chinese search competitor Baidu also rose by +5.5%. Apple shares also rose by +5.13% on increasing Ipad sales
and reports that it is substantially increasing production this month. The Semiconductor
stock index SMH rebounded by +6.3% as the Semiconductor Industry Association
(SIA) reported that sales are on track to increase almost +30% over 2009
levels.
3.China’s trade surplus increased by +140% YOY,
to the highest level this year as exports climbed higher than expected. This
puts additional pressure to let the Yuan gain higher than the US dollar, as
promised before the G20 summit last month. Meanwhile the EU sovereign debt
crisis seems to be dissipating, but long-term concerns about the viability of
the single currency Euro persist. There is ongoing discussion that the weaker
economies of the PIGS might be better off and prosper if they would return to
their own currencies.
4. The market rebounded sharply higher,
closing above the previous resistance
level of 1,063.11. The PCR peaked at a multi-month high of 1.08 on 5/28, and
then started to pull back and continues drifting slowly downward, closing the
week at 0.98. This peaking of the PCR and subsequent pullback was playing out in
classic fashion, but last week’s action means that a new market trend is in the
process of developing, but its trnd is not yet apparent. This sequence of events is charted and described
in the “members only” Latest Data Page (Sign Up for FREE membership).
5. The LTTS signal crossed back up to a weak positive number on Friday,
after spending several days in slightly negative territory. The market was
extremely oversold after several weeks of declines, and rallied sharply last
week. The PI model has reverted back to a NEUTRAL value. A SELL signal is still
possible if this is just a bear market rally, or the market could continue to
move higher from here. It is impossible to tell ahead of time which of these
two scenarios lies in our future. Meanwhile,
diversify assets between equities and fixed income as repeatedly advocated by
us. Join
our FREE membership to receive special bulletins, advance warning of optimal
entry points for the market, and analysis of financial news.
6. Short-term treasury interest rates fell this week, while long-term
rates rose. The 3 month T-bill fell from 0.17% to 0.16%, while the 30 year long
T-bond rose from 3.94% to 4.04%. Home mortgage rates were unchanged, with the national
average 30 year fixed rate at 4.80%. The slope of the Yield curve rose, and
remains at a very high 3.69%. The corresponding Recession Probability Index
(the likelihood of a future recession
in the next 12 months) is at 0%. The “Current Recession Indicator”, the likelihood that we
are still in a recession, remains at 100%.
5out of 5 indicators
are positive, the LTTS is aHOLD,
and the overall model continues in aHOLD
mode.
**************************************************************************************************
WEEKLY UPDATE – July 2, 2010
LATEST MARKET OUTLOOK
MARKET INDICES:
INDEX
VALUE %CHANGE
S&P500=
1,022.58
-5.03
DJIA=
9,686.48
-4.51
Nasdaq=
2,091.79
-5.92
INDICATORS: THIS
WEEK LAST WEEK STATUS
1. Treasury Yield Slope (%) = +3.60 +3.76+ 2. Fwd PE Ratio = 14.61 15.38+
3. Put/Call Ratio (PCR) = 1.02
1.00 +
4. Real GDP (Annual % growth) = 2.7 3.0+
5. Core CPI (Annual % growth) = 1.7
1.7+ LTTSSignal SELL
CURRENT ADVICE:
1. 4 out of 5 indicators are positive. The Long
Term Trend Signal (LTTS) is a SELL. The long-term outlook is neutral, and we are
poised to exit the stock market (see paragraph 2 of the Discussion section below).
2. The PI model is a HOLD, andnew
money destined for the stock portion of your asset allocationshould
be held in Money Market Funds.
DISCUSSION: 1. A decline in
employment and lower factory orders caused investors to continue selling stocks.
The S&P500 fell by -5.03% closing at 1,022.58, while the DJIA was -4.51% lower
closing at 9,686.48. The NASDAQ fell by -5.92%, and ended at 2,091.79. The overall multi-month
S&P500 is still up a large +51.15% since the low of 676.53 on March 9,
2009.We are also -34.67% below the market peak of 1,565.15 set
on October 9th 2007.
2. The LTTS signal crossed over to a weak
negative number on Friday after 16 months in positive territory. The market
is extremely oversold, and if it does not rally in the next few days, then the
model will flash a SELL signal, and equity funds in our portfolio will be sold
and the proceeds moved to a Money Market fund. We will send out an email to our
readers if that happens.
The LTTS is a very reliable long-term timing indicator over its 15 year
history. It has anticipated both bear markets during this period, the year 2000
dot-com bust, and the 2008 financial meltdown.
It has however also generated two false signals, where after triggering a
SELL, the market turned around and moved higher. This “whipsaw” caused it to
return to a BUY after 2 weeks and 7 weeks respectively. It is impossible to
tell ahead of time which of these two scenarios lies in our future.
3.The monthly jobs report showed 125,000
non-farm jobs were lost, with only 83,000 of these in the private sector. A
large number of job-seekers also moved into the discouraged worker category and
stopped looking for jobs, causing the
unemployment rate to drop to 9.5%. US factory orders dropped -1.4%, the biggest
drop in 15 months, led by decreases in big-ticket durable items. This stoked
fears of a “double-dip” recession where this gradually recovering economy slows
further and stalls growth for an extended period of time.
4. The market dropped sharply through the previous
resistance level of 1,063.11, and the next support level is down at 1,005.75. The
PCR peaked at a multi-month high of 1.08 on 5/28, and then started to pull back
and drifted slowly downward, closing the week at 1.02. This peaking of the PCR
and subsequent pullback was playing out in classic fashion, but last week’s
action means that a new market trend is in the process of developing. This sequence
of events is charted and described in the “members only” Latest Data Page (Sign Up for FREE membership).
5. The LTTS signal has crossed into the negative
zone for the first time in several years, signaling that extreme caution is
needed.A full-blown SELL signal could
come shortly, and new money should be placed in money market funds.Diversify assets
between equities and fixed income as repeatedly advocated by us. Remember that bonds
damp down portfolio volatility, while still capturing most of the gains.Join our FREE membership to
receive special bulletins, advance warning of optimal entry points for the
market, and analysis of financial news.
6. Short-term treasury interest rates rose this week, while long-term
rates dropped. The 3 month T-bill rose from 0.13% to 0.17%, while the 30 year
long T-bond fell from 4.07% to 3.94%. Home mortgage rates were unchanged, with
the national average 30 year fixed rate at 4.80%. The slope of the Yield curve fell,
and remains at a very high 3.76%. The corresponding Recession Probability Index
(the likelihood of a future recession
in the next 12 months) is at 0%. The “Current Recession Indicator”, the likelihood that we
are still in a recession, remains at 100%.
5out of 5 indicators
are positive, the LTTS is aSELL, and
the overall model continues in aHOLD
mode.
***************************************************************************************************
WEEKLY UPDATE – June 25, 2010
LATEST MARKET OUTLOOK
