Thursday, April 17, 2014

Initial Claims…Continuing Claims…Philly Fed…Correction

I was busy all day and didn’t follow the markets today, thus the late blog post.

INITAIL CLAIMS – CONTINUING CLAIMS ( “The initial claims level increased to 304,000 for the week ending April 12 from an upwardly revised 302,000 for the week ending April 5. The consensus expected the initial claims level to increase to 312,000. The continuing claims level fell to 2.739 mln for the week ending April 5…Seasonal volatility likely contributed to the big drop in the initial claims data. Layoff levels should stabilize back in the 320,000 - 330,000 range within a few weeks.” Story and charts at…

The Philadelphia Fed’s manufacturing index rose to a reading of 16.6 in April from 9.0 in March, stronger than a MarketWatch-compiled economist forecast of 10.0…Economists said they were going to look at data from outside the Northeast before updating their forecasts…”

Thursday, the S&P 500 was UP about 0.1% to 1865 (rounded).
VIX was DOWN about 6% to 13.36.
The yield on the 10-year Treasury Note was up to 2.72% at the close.

The Option Boys seem to think the correction is over for the S&P 500.  The Bond Ghouls are beginning to agree.

Thursday the S&P 500 was weak late in the day. Market Internals improved. 
These are conflicting indicators and the market action seemed confused today too.

I am still holding my short position, but if I had been watching the markets, I probably would have covered today.  As I said yesterday, I am not willing to lose much on this short term bet – I’ll cover Thursday if it the market goes higher. 

The 10-day moving average of stocks advancing on the NYSE increased to 52% at the close.  (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Thursday.  The spread (new-highs minus new-lows was +108.  (It was +87 Wednesday). The 10-day moving average of change in the spread was minus-3.  In other words, over the last 10-days, on average, the spread has DECREASED by 3 each day. The smoothed 10-dMA of up-volume reversed and is up as of Thursday.  The internals finished neutral on the market, but they improved and could switch to positive quickly.

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.

The NTSM analytical model for LONG-TERM MONEY remained HOLD Tuesday.  Sentiment was a screaming high 82%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. The VIX, Price & Volume indicators are all neutral, and have improved as the Index climbed the last 3-days.

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive Monday (24 Mar) at the close.   I am watching closely to see if it is time to reduce my long-term stock holdings. An NTSM sell-signal along with a break of the trend line would convince me.