Thursday, September 26, 2013

Financial Stocks suggest Stock Market Correction…GDP…Unemployment Claims

The financial sector (measured by the XLF exchange traded fund) has been leading or tracking even with the market over the past 3-months – now it is lagging.  Since the FED QE process buys Bonds from the banks, QE is a gift to the banks.  If the banks can’t perform well in this environment, the overall market may be in for trouble.  

Chart from Yahoo Finance at…
Annotated by NTSM

The below chart shows that there are other concerns in the Financial Sector XLF ETF.  A triple-top and a developing head-and-shoulders pattern are enough to worry even the most ardent bulls.  If the head-and-shoulders pattern plays out (the XLF will need to fall below the neckline of about 19.4), things may get dicey in a hurry.  That is likely to carry over into the S&P 500 index.  I’ll say it again: if the banks can’t do well in this environment, the overall market may in for trouble.
Chart from Yahoo Finance at…
Annotated by NTSM
GDP GROWING AT 2.5% (Bloomberg)
"Gross domestic product rose at a 2.5 percent annualized rate, unrevised from the previous estimate, after expanding 1.1 percent in the first quarter, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg was a 2.6 percent pace….'It’s slow and steady improvement in the economy,' said Gennadiy Goldberg, a strategist at TD Securities USA LLC in New York. 'We haven’t seen enough acceleration in momentum. The Fed wants to see more vigorous growth.'” Story from  Bloomberg at…
“The initial claims level fell to 305,000 for the week ending September 21 from an upwardly revised 310,000 (from 309,000) for the week ending September 14. 
…The continuing claims level increased to 2.823 mln for the week ending September 14 from an upwardly revised 2.788 mln…
…The computer glitches, which caused biases over the previous two weeks, have been corrected. That means there was real improvement in labor conditions in September.”  Story at…
Thursday, the S&P finished up 0.35% to 1699 (rounded) at the close.
VIX was up 0.29% to 14.05 as options players showed some concern about the market.
There was some late day buying today and the broke a 7-day string of late day selling, but overall volume was low.
Volume was low today.  In the last 2-months there have been only about 4-days that had lower volume on the NYSE, so while today was up, there wasn’t a lot of enthusiasm.
The 10-day moving average of stocks advancing on the NYSE climbed to 56% Thursday from 53% at the close Wednesday.  (A number above 50% for the 10-day average is generally good news for the market.) 
New-highs outpaced new-lows today, Thursday, leaving the spread (new-hi minus new-low) at +92 (it was +83 Wednesday).  The 10-day moving average of change in the spread is barely positive at plus 2. That just means that over the last 10-days, the spread has improved, but just barely.
Market Internals are Positive on the market for this short term indicator.
Thursday, the overall long-term NTSM analysis remains HOLD at the close.
I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)  I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.