STTG Market Recap December 5, 2013

What the heck is going on?  Five down days in a row?  Bernanke is not happy!  Granted this selling is very mild day to day, and comes after eight weeks up in a row.   Of course we have been spoiled and this feels unnatural.   The S&P 500 fell 0.43% while the NASDAQ fell a more mild 0.12%.  As usual we are in the backwards game where good news = bad news, and bad news = good news as the latter means the Federal Reserve keeps all hands on deck.  This morning 3rd quarter GDP was revised upward (which is good for the economy) but Wall Street didn't like it much.

The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish.  Gross domestic product grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department said. Economists polled by Reuters had expected output would be revised up to only a 3.0 percent rate.  The third-quarter pace is the fastest since the first quarter of 2012 and marked an acceleration from the April-June period's 2.5 percent rate.

The NASDAQ is the one to watch now as it is in a much easier to spot channel, and after being rejected at the top of it Friday has now pulled back nicely to the 10 day moving average.

spx

nasdaq

 

The positive economic news is pushing treasury rates up a bit...

tnx

 

The volatility index has spiked a bit here this week

vix

 

And the NYSE McClellan Oscillator is now into an oversold level.  Generally it will bounce here (in the pink shaded area).  If not it usually leads to a second leg down into the lower yellow shaded area.

NYMO

 

Microsoft (MSFT) was one of the biggest losers on the day among mega cap stocks as reports surfaced that they would not be getting Ford's (F) much celebrated CEO.

msft

JCPenney (JCP) tumbled  after Morgan Stanley reiterated its "underweight" rating on the stock and said November's 10 percent sales growth was not enough to change the company's outlook.  Retail stocks in general have had a rough week.

jcp

Via SentimenTrader everyone is getting into the boat:

The latest comprehensive data on mutual fund assets show that investors have continued to shovel money into equities. traded funds, an increase of $360 billion in October alone. Safe money market funds, however, suffered outflows of about $11 billion, bringing total assets down to $2.4 trillion. That means the ratio of "risky" assets to "safe" assets has ballooned to 3.7-to-1, a new all-time high dating back 30 years. The ratio follows the direction of the overall stock market extremely closely.  So a new record high in many stock indexes should generate a new high in this ratio as well.

But let's look at how stocks performed versus how the ratio changed during the last three major market swings. Leading up to the 2000 market peak, the S&P 500 rose 242% during the prior six years.  During that time, the ratio of assets in equities versus money market funds rose only 83%. The next big swing, including five years from 2002 through 2007, saw the S&P rise 90%, but the fund ratio rose significantly more, nearly 150%. Look at the latest swing.  The S&P has risen nearly 140% over four and a half years, but the ratio of assets has expanded by 236%.  The suggestion from this is that investors have become more aggressive in allocating capital to the stock market, per percentage point of increase, and in a quicker fashion than they had before."

sentimentrader

Comments

  1. Posted by Nico on December 6, 2013 at 2:36 am

    if you want to make TA your gagne-pain don't you want to learn how to draw trend lines correctly?

  2. Posted by Blain on December 6, 2013 at 11:21 am

    We feel we do an OK job at it Nico, well enough that our 17,000+ subscribers and counting are happy. We must be drawing something right I'd imagine.

    Appreciate the feedback.