“The number of Americans filing for unemployment benefits last week remained historically low. Jobless claims increased by 4,000 to 277,000 in the week ended Aug. 15…” Story at…
http://www.bloomberg.com/news/articles/2015-08-20/firings-remain-subdued-even-as-u-s-jobless-claims-increase
LEADING ECONOMIC INDICATORS (Bloomberg)
“The index of U.S. leading economic indicators unexpectedly declined in July…’Despite a sharp drop in housing permits, the U.S. LEI is still pointing to moderate economic growth through the remainder of the year,” Ataman Ozyildirim, director of Business Cycles and Growth Research at the Conference Board, said in a statement.’” Story at…
http://www.bloomberg.com/news/articles/2015-08-20/index-of-u-s-leading-economic-indicators-decreased-0-2-in-july
CORRECTION COMING (CNBC)
“As a trader, I would be careful of a looking for a bottom or aggressively buying into the next bounce. We are at a time where the risk-reward ratio in the short or near term in the market might have reached a tipping point…I would lighten up on positions and watch from the sidelines, looking for solid growth opportunities. “
http://www.cnbc.com/2015/08/20/get-ready-a-correction-is-coming-commentary.html
MARKET REPORT / ANALYSIS
-Thursday, the S&P 500 was down about 0.% to at the close.
-VIX was up about % to
-The yield on the 10-year Treasury fell to 2.13%.
The S&P 500 made its high on 21 May 2015 at a value of 2131. That was 63-trading-days ago. There is only one correction since the S&P 500 bottom of 677 on 9 March 2009 that lasted longer. That was the 19% correction that lasted 108-days (top to bottom) that ended in October of 2011. With such a long flat top in place now, it may mean that a correction now (that seems to be underway) will be nasty.
The S&P 500 fell 2% below the 200-dMA Thursday. That’s never a good sign.
The 50-dEMA of the Fosback Hi-Low Logic Index fell today since there was a dearth of new-highs so it is unlikely that this indicator will “play” in this downturn. It warned back in February.
RSI was 31 at the close Thursday and that is almost oversold so it is possible that this downturn won’t get too much farther. On the other hand, RSI has been oversold 3 times since the all-time high on May 21, 2015 and it hasn’t stopped this slow roll-over yet.
Several weeks ago I said that the Index seemed to want to retest the 2047 level. That retest occurred today (Thursday), but the volume was high (suggesting fear) and market internals remain negative. All in all, the data suggests that selling is not over. Short term indicators don’t look good except that Friday would be expected to be an up-day due to the large down-day Thursday. (That pattern is true about 62% of the time).
LONG TERM BREADTH
The 50-dMA of stocks advancing on the NYSE dipped to 47.4% Thursday, from 48.5% Wednesday. 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.
Stocks on the NYSE that are above their 200-day moving average dropped to 38% as of Wednesday – this number is way too small. Unless it improves – markets are going down. (The average is 64% over the past 3-years.)
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 45% Thursday vs. 47% Wednesday. (A number below 50% is usually BAD news for the markets. Again, New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-344. (It was -244 Wednesday.)
The 10-day moving average of change in the spread rose to minus-6, Thursday. In other words, over the last 10-days, on average; the spread has DECREASED by 6 each day. Internals remained negative on the markets.
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
Thursday, the NTSM long term indicator is HOLD. VIX is negative. Sentiment, Price, and Volume are neutral, but Volume (a variant of on balance volume) is almost negative. That indicates that the NTSM long-term indicator is almost negative.
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 25%
I-Fund (EFA): 25%
(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.
