JOBLESS CLAIMS FALL (Bloomberg)
“Fewer Americans filed applications for unemployment benefits last week, a sign
employers are holding the line on firings even as cold weather slowed
industries from manufacturing to housing. Jobless claims declined by 3,000 to 336,000 in the
week ended Feb. 15…” Story at…
PHILLY FED REPORTS SURPRISING CONTRACTION (Reuters)
“Factory activity in the U.S. mid-Atlantic region
unexpectedly contracted in February as new orders plunged, a survey showed on
Thursday. The
Philadelphia Federal Reserve Bank said its business activity index tumbled to -6.3, from 9.4 in January.
That was far below economists' expectations for 8.0, according to a Reuters
poll.” Story at…http://www.reuters.com/article/2014/02/20/us-usa-economy-phillyfed-idUSBREA1J1CM20140220
The Report stated: “Despite the weakness in current indicators,
many of the survey's indicators of future activity improved this month,
reflecting optimism about continued growth over the next six months.” Most
reports that I read suggested that this isn’t all due to weather. The economy is in a soft patch. Recent Fed comments don’t seem to indicate
much more than that, but even the Fed has a poor record at economic
prognostication. As usual Doug Short provides a detailed analysis of the Fed report at…
http://advisorperspectives.com/dshort/updates/Philly-Fed-Business-Outlook.php
LEADING ECONOMIC INDICATORS UP (MarketWatch)
“The economy will likely “remain resilient” in the first
half of 2014, with underlying conditions improving, the Conference Board said
Thursday as it reported monthly growth and stable trends for its gauge of
leading economic indicators. The LEI rose 0.3% in January, following no change
in December, signaling an economy “that is expanding moderately, although the
pace is somewhat held back by persistent and severe inclement weather,” said Ken Goldstein , a board economist.” Story at…
Not much economic news on the schedule for Friday. Existing home sales were down a little, 4.62M
vs. 4.7M expected.
EXISTING HOME SALES
“The severe winter weather played a part in the
disappointment, yet the National Association of Realtors (NAR) acknowledged in
its report that it wasn't all weather related.” Story at…
MARKET REPORT
Friday, the S&P 500 was down 0.2% to 1836 (rounded). Volume was 6% above the monthly average.
That’s not much, but volumes have been low over the prior 8-trading sessions so
it is a bump up.
VIX was down about 0.7% to 14.68.
The yield on the 10-year Treasury Note was unchanged at
2.73%.
As noted earlier: A key point to watch will be how far the index falls, if
it does continue down. The half-way
point (between the recent low of 1742 and the reversal high of 1840 today) is
1791. If the correction is truly over,
that is about where the S&P 500 should bounce up. If the index falls below that level I think
it will test the prior low of 1742. I’m
mostly guessing from prior chart patterns.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 64%
at the close. (A number above 50% for
the 10-day average is generally good news for the market.) New-highs outpaced new-lows Friday, leaving
the spread (new-highs minus new-lows) at +157. (It was +107 Thursday). The 10-day moving
average of change in the spread was +14. In other words, over the last 10-days,
on average, the spread has increased by 14 each day. Up volume fell again on
the day, and the 10-dMA is now falling so I judge internals to be neutral due
to falling up-volume.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2013, using these internals
alone would have made a 16% return vs. 30% for the S&P 500 (in on Positive
out on Negative – no shorting). Of
course, few trend-following systems will do well in an extreme low-volatility,
straight-up year like 2013.
NTSM
The NTSM system remained HOLD today, Friday. The first Sell signal of this cycle was just
over 2-weeks ago on 24 January. I am not going to remain at 40% invested in
stocks much longer unless I see definite downward trends in the indicators.
Let’s look at the trend direction of the NTSM indicators:
-Sentiment: Increasing.
That’s headed in the wrong direction, but it’s not really a negative until
this reaches extreme values.
-Price is creeping up so that’s good (up moves have been
bigger than down).
-The Volume indicator is now positive and heading up, so
good news on this indicator too (more volume on the positive side).
-VIX increasing and that is a negative.
So the indicators are tied in their trend: 2-negative and
2-positive.
MY INVESTED POSITION
I am about 40% invested in stocks because I upped my
stock holdings by 10% on 12 February (S&P 500-1819) based on Market
Internal signals. This is a conservative
allocation, but putting a bit more into stocks recognizes that the market
internals are improving on the S&P 500 and the “correction” may once again
confound the bears. Can you say March?
I’ll reassess at the end of the month and add more or pull some out depending
on indicators.
