Tuesday, April 15, 2014

Profits Falling…Retail sales…Empire Manufacturing

“-Earnings Growth: The estimated earnings decline for Q1 2014 is -1.6%. If this is the final percentage for the quarter, it will mark the first year-over-year decline in earnings since Q3 2012 (-1.0%).
-Earnings Guidance: For Q1 2014, 93 companies have issued negative EPS guidance and 18 companies have issued positive EPS guidance.”  For the full report see...

Retail sales in March were pretty much in line with expectations, up to 1.1% from the prior month’s gain of 0.7%.

“The April 2014 Empire State Manufacturing Survey indicates that business activity was flat for New York manufacturers. The headline general business conditions index slipped four points to 1.3. The new orders index fell below zero to -2.8, pointing to a slight decline in orders, and the shipments index was little changed at 3.2. The unfilled orders index remained negative at -13.3, and the inventories index dropped ten points to -3.1.”  Press release at…
The Briefing.com consensus was for a reading of 7.5 up from 5.6 the previous month.  1.3 is a bad print.

“Stocks could be setting up for a 10 to 20 percent correction, and the odds are good that it will be soon, according to Sam Stovall, chief equity strategist at S&P/Capital IQ…Stovall has been expecting a 10 to 20 percent correction this year, but he says it's more likely to begin during the second quarter, based on historic market patterns...Stovall also says historically, corrections are likely to occur during midterm election years, when the declines have averaged 19percent in the S&P 500.” Story at…

April 15TH…speaking of taxes…
HUNTING THE RICH (ArmstrongEconomics.com)
“…It is not what an individual needs that is the issue. Take all the money away from Bill Gates. How will this improve your life at all? The issue is HOW MUCH is government consuming. But as long as they point to the “rich” they get to waste your money…The solution is NOT to raise taxes on the rich, for government will still spend more than it takes in regardless of who pays…It is taxes that we must address – not how much someone else makes.”  Commentary at…

Tuesday, the S&P 500 was UP about 0.7% to 1843 (rounded).
VIX was DOWN about 3% to 15.61.
The yield on the 10-year Treasury Note was down slightly to 2.62% at the close.
Tuesday the S&P 500 had another strong close late in the day.  Jeepers!  The markets keeps going up and the NYSE market internals keep getting worse.  I think the index will break down soon and may not have the blow-off of a 1%-day at 1850.
A big move up now that would qualify as statistically significant in my number-crunching system would make an excellent short position as long as it occurs soon.  Typically, that is about a 1% gain.  That would wash out the shorts and push stocks higher.  Such a move (if it were to occur) would be caused in part by short covering.
If the market breaks significantly above 1850, it may keep going higher.  

The 10-day moving average of stocks advancing on the NYSE declined to 48% at the close.  (A number below 50% for the 10-day average is generally bad news for the market.) New-lows outpaced new-highs Tuesday.  The spread (new-highs minus new-lows was minus-2.  (It was +13 Monday). The 10-day moving average of change in the spread was minus-16.  In other words, over the last 10-days, on average, the spread has DECREASED by 16 each day. The smoothed 10-dMA of up-volume continued down Tuesday.  The internals finished negative on the market.

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, but just barely.

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.