PHILADELPHIA FED BEATS BY A LOT
“The latest manufacturing report from the Philadelphia Federal
Reserve came in at 23.9. Economists were looking for a reading of 16.0, below last month's 17.8 reading.” Story at…
http://www.businessinsider.com/philly-fed-manufacturing-july-17-2014-7The headline was “Philly Fed Crushes Expectations.” In the current world of the markets, good news is bad news because good economic numbers will push the Fed to act sooner to raise rates. Fed rate hikes will be very bad for stocks.
More good/bad news…
JOBLESS CLAIMS (FOX Business)
“The number of Americans filing new claims for
unemployment benefits unexpectedly fell last week, suggesting the labor market
recovery was gaining traction. Initial claims for state unemployment benefits
dropped 3,000 to a seasonally adjusted 302,000 for the week ended July 12, the
Labor Department said on Thursday.” Story at…
http://www.foxbusiness.com/economy-policy/2014/07/17/weekly-jobless-claims-slip-to-302k/
FED PUTTING ECONOMY AT RISK (CNBC)
“Stan
Druckenmiller, the retired founder of hedge fund firm Duquesne Capital
Management, says the Federal Reserve is putting the economy at risk by
continuing its aggressive market intervention… ‘I hope we can all agree that
once-in-a-century emergency measures are no longer necessary five years into an
economic recovery,’ Druckenmiller said.” Story at…
http://www.cnbc.com/id/101838762EVEN SOME FED OFFICIALS AGREE (CNBC)
“In the last week, three vocal Federal Reserve officials
have been urging their colleagues to stop filling up the proverbial punch bowl.
…Fisher's camp includes
Kansas City Fed President Esther George and Philadelphia Fed President Charles
Plosser. Both have also spoken in the last week, with Plosser telling
Bloomberg TV he thinks "we are closer than a lot of people
might think" to a hike in interest rates. A survey conducted by
the New York Fed in June shows market participants generally
forecast the rate hike will occur in the third quarter of 2015. If the Fed
doesn't act sooner, Plosser worries the Fed "may lose control in financial
markets" and find itself having to raise rates faster and higher than
otherwise hoped. "We'll lose credibility. We may lose control of
inflation," he said. "That could be very disruptive." Story at…
http://money.cnn.com/2014/07/17/investing/federal-reserve-hawks-punchbowl/index.html?iid=LeadFed Chair, Janet Yellen, said yesterday she’s sees a need for continued stimulus.
MARKET REPORT
Thursday, the S&P 500 was
down about 1.2% to 1958 (rounded).
VIX rose a whopping 32% to 14.54. The yield on the 10-year Treasury Note was down to 2.45% at the close. The Bond Ghouls still smelled fear. Troubles around the world are also sending buyers to the US and driving interest rates down.
CORRECTION WATCH – CLUES BOTH WAYS
No Correction: The Percentage of Stocks above their
200-dMA rose to 63% Tuesday (data is a day late); 61% is the trouble point for
that stat, but I couldn’t get an updated number for Wednesday. No point in going to a different site because
the data can be based on a different moving average.
Correction Now: Statistically, the index is too “quiet”
(as it has been since mid-May) and a pullback is suggested anytime. Chart wise,
the index drifted up to near (or at) the top of the 3-month chart upper trend
line Monday and that could mean the Index is already for pullback mode. The
Market Internals on the NYSE returned to negative Monday and have remained
negative through Thursday. There was significant late day selling today; but as
is frequently the case, there were conflicting indications: Tick (the last
trades of the day) was up at the close.
We can look back to the high on 3 July and note that RSI
was oversold; Market Internals were deteriorating; late day trading was trending
down; the Index was 8.5% above its 200-day moving average (only 1.5% below my “negative”
level). Bottom line: Numbers are suggesting the S&P 500 is now in pullback
mode. Still, the big down day Thursday was statistically significant and technically
suggests an up day tomorrow (62% of the time). The news may play otherwise.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) fell to 44% at the close Thursday. (A number below 50% for the 10-day average is
generally BAD news for the market.) New-highs outpaced New-lows Thursday. The spread (new-highs minus new-lows) was +49.
(It was +95 Wednesday.) The 10-day moving average of change in the spread rose
to 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
was DOWN today and the Internals remained 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.
NTSM
The NTSM analytical model for LONG-TERM MONEY remained
HOLD Thursday, but most indicators deteriorated. Sentiment remained 77%-bulls (5-dMA of
{bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim funds at
the close on Wednesday (data is a day late). (83% is the negative level for the
Sentiment indicator.) This value was 85%-bulls on 19 May. Sentiment, Price, Volume
& VIX indicators are all 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 STOCKS--ENSCO (ESV): HOLD (Earnings announce 31 July)
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
Ensco has surpassed the mean and median analyst price targets so I rate it hold. There are numerous positive reports though, and with a PE of around 6, downside is limited. In the meantime, yield is over 5%.
