NEW YORK ( TheStreet) -- In mid-March I began to worry about the sustainability of the stock market rally and reiterated my call to raise cash and reduce allocations to stocks to a maximum of 50%. Transports and small caps peaked in mid-March, while industrials peaked on April 11. The S&P 500 set a new all time high on Thursday with the Nasdaq at a new multi-year high.
My original themes for 2013 were presented Jan. 4 in 10 Themes for the New Millennium Teen Years. Today I update these themes within the context of how markets have performed since the ides of March.
- The Housing Recovery Will Remain Sluggish in 2013. The National Association of Home Builders Housing Market Index has stalled below the neutral 50 reading with a current reading at 42 in April. On April 18 I wrote, Homebuilder Upgrades Fortify Potential Sinkholes establishing the low end of the trading range for the industry. Then on April 30 I wrote, Homebuilder Downgrades Cloud Earnings. This morning Beazer Homes (BZH) has been downgraded to sell from hold. This week the NAHB described the housing recovery as getting back to a level at half the potential of a strong housing recovery. My conclusion -- the housing market remains sluggish.
- The Rebound in Home Prices Will Be Slow. The Case-Shiller 20-City Composite rose 0.3% in February and is up 9.3% year over year. From the June/July 2006 peak this index is still down about 30.0%. The pace of price gains has slowed as home buyers continue to have trouble qualifying for a mortgage at today's extremely low mortgage rates. The latest chart shows that the 20-City Composite has moved sideways around a reading of 150 since mid-2009. The 9.3% year over year gain is merely a move back towards 150 from the low point for home prices set a year ago.
- The Upside for Money Center and Regional Bank Stocks Will Be Limited in 2013. During the first four months of 2013 three of the four 'too big to fail' banks were downgraded to hold from buy. There is only one buy rated bank in the BKX. On Thursday I wrote, Bull Market Will End Without Big-Bank Leadership and keep in mind that the KBW Bank Index peaked on the ides of March
- Community Banks Will Continue to Fail. The FDIC List of Problem Banks was 75 at the end of 2007, and 651 at the end of 2012, more failures are certain. So far in 2013 only 10 banks have been closed by the FDIC bringing the total since the end of 2007 to 475. My prediction continues to be that 500 banks would fail before the 'Great Credit Crunch' ends.
- Consumer Confidence Will Remain Below Neutral. We began the year with a 65.1 reading on the Conference Board's reading of consumer confidence. In April the reading improved to 68.1 from 61.9 in March, but remains well below the 90 to 110 range considered the neutral zone for this measure. Chart below courtesy of Advisor Perspectives.
- The 10-Year Treasury Note Low Yield Environment Will Continue. My annual pivot at 1.981% has been a magnet so far in 2013, as any backup above this yield has been a buying opportunity. This scenario continued into May with a new year-to-date low yield at 1.612% versus my semiannual risky level at 1.413.
Comparing stocks versus bonds since March 15: If you bought IShares Barclay's 20+ Year Treasury Bond Fund (TLT) at $115.76 on March 15 and sold it at $123.85 on Thursday you made 7.0%. If you bought SPDR S&P: 500 ETF Trust (SPY) at $155.83 on March 15 and sold it at $159.75 on Thursday you made 2.5%. So even with SPY at a new all-time high, buying TLT outperformed the S&P 500 by 4.5% since the ides of March.
- The Comex Gold Bubble Will Not Re-inflate. Gold plunged below its 200-week simple moving average at $1440.5 in April, but stabilized just above this key level as May begins. If you bought SPDR Gold Trust (GLD) on March 15 at $154.00 and sold at $141.92 at Thursday's close you lost 7.8%. Clearly bonds have outperformed gold since the ides of March.
- The Nymex Crude Oil Bubble Will Not Re-inflate. Since March 15 crude oil traded up from $93.45 per barrel to $97.80 on April 1, then down to $85.61 on April 18, then back up to $93.99 at Thursday's close.
- The Euro vs. the Dollar Will Maintain a Trading Range. After trading up to 1.37 into February, my annual pivot at 1.3257 was a magnet to bring the euro back down. On March 15 the euro was at 1.3072 and at 1.3064 at Thursday's close. My semiannual value level at 1.2797 held on weakness going into the second quarter.
- The Stock Market Is a Risky Asset Class in 2013. QE 3 and QE 4 continue to prop up the stock market. While I cannot confirm a top, I cannot justify changing my suggested 50% allocation to cash. Given overvalued fundamentals and overbought technicals adding new money to stocks is not a prudent strategy unless a buy rated stock is taken to the woodshed and tests a value level on weakness.
The major equity averages straddle key levels: The Dow is above my monthly and semiannual value levels at 14,651 and 14,323. The S&P 500 is above my monthly and semiannual pivots at 1587.3 and 1566.9. Dow transports has been trading back and forth around its semiannual pivot at 5955 with a monthly risky level at 6284. The Russell 2000 has yet to test monthly and semiannual risky levels at 962.82 and 965.51. My annual value levels at 12,696 Dow industrials, 1348.3 S&P 500, 2806 Nasdaq, 5469 Dow transports and 809.54 Russell 2000 will be tested in 2013. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV