The Shanghai Composite Index ended down 8.5% at 3,725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. China’s main index is up 6% from its recent low on July 8, but still off 28% from its high in June…Analysts say the selling came as investors fear the government is curbing its buying of blue-chip stocks—and could even be testing whether the market can support itself.” Story at…
http://www.marketwatch.com/story/shanghai-plunges-8-on-worries-beijing-is-ratcheting-down-inflows-2015-07-27
DURABLE GOODS ORDERS UP (USA Today)
“Orders for durable goods jumped 3.4% in June from May, when orders had fallen 2.1%, the Commerce Department reported Monday. The gain was the best result since March and largely reflected a surge in demand for commercial aircraft…Orders for machinery were up 1.4%, while demand for computers and related products shot up 9.1%.” Story at…
http://www.usatoday.com/story/money/markets/2015/07/27/durable-goods/30726285/
My cmt: That last sentence is why Intel did well today. It was up 0.7% vs the S&P 500, down 0.6%.
MARKET REPORT / ANALYSIS
-Monday, the S&P 500 was down about 0.6% to 2068 at the close.
-VIX was up about 14% to 15.6.
-The yield on the 10-year Treasury dipped slightly to 2.23%.
Monday, the S&P 500 tested 2064 (the 200-dMA) right after the open. It didn’t fall below the 200-dMA, but it couldn’t climb much higher afterward, either. It is 0.2% above the 200dMA at today’s close. Market Internals continued to deteriorate and it looks like the S&P 500 wants to test its prior low of 2047 on 8 July. It has not broken the 200-dMA yet though, I suspect that this time it will do it. We’ll see.
The numbers support the bearish tone in the Markets and until we see some turn-around, I am short-term bearish on the markets. Personally, I am not short now, but I will look for an opportunity to go long in my trading portfolio with a leveraged ETF like QLD or perhaps even a purchase of XIV if we can manage to see a bottom.
LONG TERM BREADTH
The 50-dMA of stocks advancing on the NYSE was 46% Monday. Below 50% is not good; it simply means that more than half of the stocks on the NYSE have gone down over the past 2-1/2 months.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 41% Monday. (A number above 50% is usually GOOD news for the markets. Once again, New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was -451. (It was -383 Friday.)
The 10-day moving average of change in the spread fell to minus-49, Monday. In other words, over the last 10-days, on average; the spread has DECREASED by 49 each day. Internals remain negative on the markets and continue to get worse.
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 2014, using these
internals alone would have made a 9% return vs. 13% 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, nearly straight-up year like 2014.
NTSM
Monday, the NTSM long term indicator is HOLD. All long-term indicators remain neutral.
MY INVESTED STOCK POSITION
On 13 July, I increased my investments from 30% invested
to 50% invested in stocks. I spilt stock investments roughly equally between
S&P 500, Euro/pacific ETF (EFA), and the Dow Jones Completion Index (DWCPF)
as noted in an earlier post. (My 401k
{the TSP} is limited in its choices.)Since 13 July the Dow Jones Completion Index (DWCPF) has underperformed the S&P 500 by about 1.8%. The Euro-Pacific (EFA) has underperformed by 0.2%. With this unsettled market there has been a flight to safety. I’ll do the same and shift to S&P 500 (C-fund) at the end of the month or sooner if I get a sell signal in the long-term indicators.
TSP ALLOCATION (This is a conservative position most appropriate for retirees or conservative investors.) I think all investors would be well served to cut their stock investments to a lower than normal (for each individual) allocation. Until longer term technicals look better, the old adage that one’s stock allocation should equal your age subtracted from 100 seems reasonable. (40years old: 100-40 = 60% in stocks) 50% would be the lowest stock allocation unless conditions deteriorate.
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 15%
S-Fund (DWCPF): 15%
I-Fund (EFA): 20%
