Thursday, May 15, 2014

Jobless Claims….Consumer Prices…Industrial Production…Bear Market is Coming

The fewest Americans in seven years filed applications for unemployment benefits last week as the labor market continued to improve…Jobless claims dropped by 24,000 to 297,000 in the week ended May 10…“The way the job market continues to improve, the number of people collecting benefits keeps going down,” said Brian Jones, senior U.S. economist at Societe General in New York.”  Story at…

U.S. consumer prices recorded their largest increase in 10 months in April, pointing to some inflation in the economy. The Labor Department said on Thursday its Consumer Price Index increased 0.3 percent last month as food prices rose for a fourth consecutive month and the cost of gasoline surged.” Story at…

“U.S. industrial output fell at its fastest rate in more than 1-1/2 years in April as factory production slumped, tempering hopes for a big jump in economic growth after a winter slowdown. Production at the nation's mines, factories and utilities slipped 0.6 percent last month, the largest decline since August 2012…”

“Surging cargo volume in Hampton Roads made April the third-best month in the Port’s history…The port moved 201,390 standard 20-foot containers, or TEUs, up 12.3 percent from 179,370 in the same month a year ago.” Story at…
This is hardly an indication of recession.  The current stock market problems in the NASDAQ and small cap issues are due to high valuations.

“David Tepper, who made the most money of any hedge fund manager in 2013 at $3.5 billion, believes investors better approach the market with more caution now. ‘I'm not saying go short, I'm just saying don't be too fricking long right now,’ the head of Appaloosa Management told a few thousand of his colleagues Wednesday at SkyBridge Capital's SALT 2014 conference in Las Vegas.” Story and video at…

“Two months ago, I pointed out that the U.S. stock market had topped out and was going through a churning process. Since that observation, the Dow Jones Industrial Average has risen a bit higher but the Nasdaq COMP and Russell 2000 indexes have dropped below their 50-day and 100-day moving averages. It’s only a matter of time before the Dow follows…No matter how many times you tell investors to be wary of a dangerous market, most don’t listen. Based on the clues, indicators, and personal observations, crunch time is getting closer. No one knows when, but I am certain: a bear market is inevitable — sooner rather than later. This is not doom and gloom. It is market reality.” - Michael Sincere ( Commentary at…

Thursday, the S&P 500 fell about 0.9% to 1871 (rounded).
VIX ROSE about 8% to 13.17.
The yield on the 10-year Treasury Note fell further to 2.49% at the close.
The Bond Ghouls are suggesting a stock market rout. A true rout may be postponed a little since the S&P 500 is now only a few points above its 50-day moving average so that should trigger some buy-the-dip action.

As I have been saying for a few days, since the S&P 500 finally moved above the old high of 1891, it needed to advance further.  The failure to move higher than 1897 could be signaling a pullback. The smart money is concerned too. The late-day action was fairly flat today, but over the longer term the smart money (trading in the late day) has been selling.

The reversal today in the new-high/new-low data is suggesting down.  There were more stocks making new-lows on the NYSE than new highs.
The 10-day moving average of stocks advancing on the NYSE dropped to 49% at the close.  (A number below 50% for the 10-day average is generally bad news for the market.) In a reversal, New-lows outpaced new-highs Thursday.  The spread (new-highs minus new-lows) was minus-13. (It was +47 Wednesday.) The 10-day moving average of change in the spread was minus-11.  In other words, over the last 10-days, on average, the spread has DECREASED by 11 each day. The smoothed 10-dMA of up-volume remained DOWN today.  The internals switched are negative on the market today.

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 Thursday.  Sentiment rose to a very high 84%-bulls (5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds. (That was dip buying Wednesday.) On a statistical basis, Sentiment is negative.  Price, Volume & VIX indicators are neutral.

I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive 24 Mar at the close.  50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.
                             --INDIVIDUAL VALUE STOCKS (New Feature)--
For discussion see:
Motley Fool suggests that the owners of floating rigs have overbuilt and rig-rentals and revenues will fall in the future.  Commentary at…

Research has shown that to have a diversified portfolio no one stock should be more than 4% of the portfolio total, or stated another way, if your total portfolio consisted of individual stocks, you would need at least 25-stocks to be “diversified.”