StreetSmartPost

Saturday, March 8, 12 noon.

The world’s focus has been on China’s slowing economy over the last few years. Given its huge population and importance as a consumer of the world’s goods, as well as the holder of a large amount of U.S. bonds and other debt, concerns are that a hard landing in China would have a devastating effect on the economies of the rest of the world.

There is no doubt that China’s economic growth is slowing.

And the economic reports have been getting worse in recent months, slowing manufacturing, slowing exports. The situation has had China’s previous surging stock market in a serious bear market, unable to recover from the global meltdown of 2008. (Slowing economies do have an effect on stock markets).

However, in the big picture, China’s spectacular growth path toward catching and surpassing the U.S. to become the world’s largest economy continues.

The reason of course is that while China’s annual economic growth rate (GDP) has slowed from double-digits in 2010 to under 7%, it remains well above the rest of the world, and in particular the anemic 2% growth rate of the U.S. and Europe.

As a result, China’s economy, which just caught up to and passed Japan to become the world’s second largest economy in 2010, already has an economy that has grown further and is two times the size of Japan’s.

When will it catch up to the U.S.? Estimates vary from as soon as 2016 (OECD) to 2028 (Centre for Economic and Business Research). Why so great a disparity? Apparently, it’s difficult to compare economies using different currencies with wide differences in the purchasing power of their population.

But no matter how you cut it, in the long-term China continues to come on.

Fears that its slowdown to 7% growth or less may affect global economies is real.

But if it slows their growth rates it only increases the pace at which it overtakes or surpasses then (as witness the degree to which, in spite of its own slowing economy, China has surpassed Japan since catching up to it just three years years ago.

Important Anniversaries.

The bull market will reach its 5th birthday on Monday. The 2007-2009 bear market bottomed on March 9, 2009. The bull market began on March 10.

Next week, March 15, will also mark the 6th anniversary of the collapse of Bear Stearns in 2008, which triggered the realization that a financial collapse was underway.

Is the Nasdaq at least short-term overbought?

I know. It’s the hottest sector of the market, and has been the hottest index through the entire bull market. A Barron’s article this morning is titled ‘Next Stop Nasdaq 5000’.

But has it gotten ahead of itself in the excitement again, and due for another short-term setback? 4200 before 5000?

Other Voices:

MarketWatch: “Richard Fisher, president of the Federal Reserve Bank of Dallas, on Wednesday said he was concerned about "eye-popping levels" of some stock market metrics, and said the central bank has to monitor the signs carefully to make sure another bubble isn’t forming. In his speech in Mexico City, Fisher said some indicators like the price-to-projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP, are at levels not seen since the dot-com boom of the late 1990s. He noted that margin debt is pushing up against all-time records. "We must monitor these indicators very carefully so as to ensure that the ghost of ‘irrational exuberance’ does not haunt us again,"

Barron’s, Rashma Kapadia: “Mutual-fund investors have long had a reputation for joining the party too late, and a recent analysis of fund flows over the past decade does little to disprove that perception. . . . . According to Vanguard’s Investment Strategy Group, for the strongest part of this bull market — from 2009 through 2012 — most investors were still skittish about stocks. But they poured $62 billion into U.S. equity funds last year, and another $9 billion so far this year. At the end of 2013, investors’ global equity allocation hit 58%, more than its 20-year median of 50% and close to a peak, in part because of the strong run in stocks, according to Vanguard.”

To read my weekend newspaper column click here:   Safe Havens Are Trouncing Stocks So Far This Year

Subscribers to Street Smart Report:

In addition to the charts and signals in the ‘premium content’ area of this blog, the new issue of the newsletter will be in your secure area of the Street Smart Report website on Wednesday.

Yesterday in the U.S. Market.

A mixed day. Another day of strength in the morning and weakness in the afternoon, although on a subdued basis in both directions. The program-trading firms (the major brokerage firms) managed their usual trick, closing the Dow positive going into the weekend, with last half-hour buy programs on a couple of Dow stocks. Volume was just over 0.7 billion shares traded on the NYSE.

The Dow closed up 30 points or 0.2%. The S&P 500 closed unchanged. The NYSE Composite closed down 0.1%. The Nasdaq closed down 0.4%. The Nasdaq 100 closed down 0.5%. The Russell 2000 closed down 0.1%. The DJ Transportation Avg. closed up 0.4%. The DJ Utilities Avg closed up 0.3%.

Gold closed down $11 an ounce at $1,340, but up $15 for the week.

The U.S. dollar etf UUP closed down 0.1%.

The 20-yr bond etf TLT closed down 0.6%.

Asian markets closed mixed in their last session of the week.

Asian markets closed mixed Thursday night (Friday in the U.S.). 

Among individual markets:

Australia closed up 0.3%. China closed down 0.1%. Hong Kong closed down 0.2%. India closed up 1.9%. Indonesia closed down 0.1%. Japan closed up 0.9%. Malaysia closed down 0.1%. New Zealand closed up 0.2%. South Korea closed down 0.1%. Singapore closed up 0.2%. Taiwan closed unchanged. Thailand closed up 0.2%.

European markets closed down sharply yesterday:

The Europe Dow closed down 1.5%.

Among individual countries:

The London FTSE closed down 1.1%. The German DAX closed down 2.0%. France’s CAC closed down 1.2%. Belgium closed down 1.2%. Greece closed up 1.7%. Ireland closed down 1.8%. Italy closed down 1.0%. The Netherlands closed down 0.9%. Norway closed down 0.4%. Portugal closed down 0.5%. Spain closed down 1.4%. Switzerland closed down 1.3%.

Global markets for the week. 

Premium Content Area.

For Street Smart Report subscribers only, used to provide additional info to that provided in the newsletter, mid-week reports, and hotlines.

In the premium content area this morning: The U.S. stock market, gold, and bonds, signals and analysis of each.

Thursday, March 6, 9:25 a.m.

The market clearly remains in its bull market. We don’t need our new long-term indicator to verify that, but it does.

It’s a proprietary weighted composite of major U.S. stock market indexes, with a long-term moving average providing trend direction, and support and resistance levels.

The m.a. is also the trigger line for potential major trend reversals.

Over the last 20 years, there have been five major trend reversals, into three bull markets and two bear markets. There were also seven reversals that resulted in only corrections of 10% to 19% for the S&P 500 or Dow, and then re-entries. Those provided no gains or losses before re-entries, but were properly positioned for the fear at the time that a bear market had potentially begun. 

The strategy incorporates a five-day delay before acting on a signal, which is designed to eliminate those times when a break above or below the trigger line is a false signal that lasts only a few days before the major trend is re-confirmed. Those instances are circled in blue. 

This carefully researched and developed new indicator will provide considerable impact on our outlook in the future, in providing more confidence in our intermediate-term buy and sell signals, and both long-side and downside positions in our portfolios, therefore less holding of cash due to risk concerns.

It may also result in its own portfolio for buy and hold investors interested only in exiting for bear markets.

But will the bull market last into the market’s unfavorable season again this year?

Will it even last until the end of the favorable season in April or May?

U.S. economic reports this week were mixed and showed some glimmers of hope for a change.

Monday’s reports were that Consumer Spending was up 0.4% in January, double the consensus forecast of 0.2%. Consumer Income was up 0.3%, also better than the consensus forecast for 0.2%. Construction Spending was up 0.1% in January. The consensus forecast was for a decline of 0.4%. The ISM Mfg Index recovered partway from its scary plunge to 51.3 in January, improving to 53.2 in February The consensus forecast was for a smaller bounce-back to 52.5.

But then yesterday the ADP Employment Report for February showed only 139,000 jobs were created in the private sector in February, considerably worse than the consensus forecast of 160,000. And the previous report of 175,000 jobs in January was revised down significantly to only 127,000. And the ISM non-mfg Index, which covers the services sector, unexpectedly declined from 54.0 in January to 51.6 in February. The consensus forecast was for a smaller decline to 53.0.

This morning it was that U.S. productivity in the 4th quarter was revised down sharply, from the previously reported 3.2% to 1.8%. Is that an indication that the next revision of 4th quarter GDP growth will be further to the downside. The revision last week was from the original 3.2% to 2.4%, which has forecasts for this quarter already revised down to under 2%.

Let’s hope it is indeed all weather related.

But, investor sentiment isn’t encouraging.

Ned Davis Research reports its Crowd Sentiment Poll is showing extreme optimism, at a level it considers bearish for the market.

Investors Intelligence reports its sentiment index is at 53.5% bulls, 17.2% bears. 55% bulls, or less than 18%bears, is considered bearish for the market.

The National Assoc. of Active Investment Managers (NAAIM) poll has jumped from 76% bullish to 92%. Below 30% is considered bullish for the market, above 70% is considered bearish for the market.

Meanwhile, the Vickers Weekly Insider Report from Argus Research, reports corporate insiders are as bearish, based on the ratio of their buying and selling, as they were in 2007 just before the 2007-2009 market collapse.

We’ll just trust our technical indicators, intermediate-term, and now long-term.

The short-term indicators, which have been correct with the market’s short-term gyrations have turned mixed.

To read my weekend newspaper column click here:  Do Economic Reports Mean Anything This Time-

Subscribers to Street Smart Report:

In addition to the charts and signals in the ‘premium content’ area of this blog, the mid-week Markets Report (stocks, gold, & bonds) is in your secure area of the Street Smart Report website from last evening.

Non-Subscribers:

Don’t be too late with a New Year’s resolution to make more profits this year, and just as importantly avoid losses, and at very reasonable cost! Subscribe now!

Yesterday in the U.S. Market.

A mixed and flat market, on low volume of 0.65 billion shares traded on the NYSE.

The Dow closed down 35 points, or 0.2%. The S&P 500 closed unchanged. The NYSE Composite closed down 0.1%. The Nasdaq closed up 0.1%. The Nasdaq 100 closed up 0.2%. The Russell 2000 closed down 0.2%. The DJ Transportation Avg. closed up 0.3%. The DJ Utilities Avg closed down 0.7%.

Gold closed down $1 an ounce at $1,340.

The U.S. dollar etf UUP closed down 0.1%.

The 20-yr bond etf TLT closed up 0.2%.

European Markets closed mixed yesterday.

The London FTSE closed down 0.7%. The German DAX closed down 0.5%. France’s CAC closed down 0.1%. Belgium closed up 0.2%. Denmark closed up 0.1%. Finland closed up 0.4%. Greece closed down 0.3%. Ireland closed up 0.3%. Italy closed up 1.3%. Netherlands closed down 0.1%.  Norway closed down 0.2%. Portugal closed up 0.7%. Spain closed up 0.9%. Switzerland closed up 0.2%.

Asian Markets closed up last night.

The Asia Dow closed up 0.8%.

Among individual markets: 

Australia closed up 0.1%. China closed up 0.3%. Hong Kong closed up 0.6%. India closed up 0.6%. Indonesia closed up 0.6%. Japan closed up 1.6%. Malaysia closed up 0.6%. New Zealand closed up 0.8%. South Korea closed up 0.2%. Singapore closed up 0.4%. Taiwan closed up 0.9%. Thailand closed up 0.1%.

Subscribers Premium Content Area.

For Street Smart Report subscribers only.

To obtain access please click on the ‘Subscribe’ link. It will take you to an information page on subscribing to Street Smart Report, a subscription to which includes access to the premium content area of this Street Smart Post blog.

In the premium content area this morning: The U.S. stock market, gold, and bonds.