-“S&P 500 companies with higher global exposure are reporting lower earnings growth and lower revenue growth relative to S&P 500 companies with lower global exposure for the third quarter…”
-“For Q3 2015, companies are reporting year-over-year declines in both earnings (-2.2%) and revenues (-3.7%). Analysts do not currently project earnings growth and revenue growth to return until Q1 2016. In terms of earnings, analysts are currently predicting a decline of 3.7% in Q4 2015, followed by growth of 2.1% in Q1 2016.” Factset Earnings Insight at…http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_11.6.15/view
CASS FREIGHT INDEX (Cass Information Systems)
“The number of freight shipments increased 1.7 percent in September, reversing a two month slide.” – Cass Information Systems. My cmt: The report stated that year-over-year, shipments were down 1.5% and expenditures were down 8%. This data suggests to me that the transportation segment of the economy is continuing to slow. Press release at…
http://www.cassinfo.com/Transportation-Expense-Management/Supply-Chain-Analysis/Cass-Freight-Index.aspx
CHINA EXPORTS DOWN AGAIN (Marketwatch)
“China's exports fell in October for the fourth consecutive month, as a once-powerful engine of the country's growth continued to sputter in the face of weak global demand…China's General Administration of Customs said October exports fell 6.9% year-over-year in dollar terms…”
http://www.marketwatch.com/story/china-exports-slump-for-fourth-straight-month-2015-11-08
NEW HIGHS AT NEW HIGHS – BEAR MARKET APPROCAHING
One of the indications of an approaching bear market is the amount of stocks making new-highs over the past year on the NYSE on days when the S&P 500 is making its new-highs. The data is very clear; stocks making new 52-week highs on days when the Index is making a new high has been falling. At the new-high on 23 April 2010, there were 22.6% stocks making new-highs. On 2 April 2013, 9.4% of stocks were making new-highs. At the recent S&P 500 top on 21 May 2015, only 2.5% of NYSE stocks were making new highs, 10-times less than 5-years ago. This steady decline is significant. At the 1929 high, only 2% of stocks made new-highs. Essentially, we are there now.
We can also look at Breadth (average % of stocks advancing over the last 50-days) at those same new highs. The results are similar: breadth has been falling steadily too. At the new-high on 23 April 2010, the 50-dMA of advancing stocks was 58.1%. On 2 April 2013 the 50-dMA of advancing stocks was 54.5%. At the recent new high on 21 May 2015, the 50-dMA of advancing stocks was only 52.6%. This was at the top. A number below 50% is typical of a market in decline. A number as low as 52.6%-advancing at a top is very weak.
It is time to be very cautious in the markets; reduce risk and don’t go to sleep. Unless there are improvements in internals, it is time to be certain you are comfortable with the amount you have invested in stocks.
MARKET REPORT / ANALYSIS
-Monday, the S&P 500 was down about 1% to 2079 at the close.
-VIX was up about 15% to 16.52. (Someone woke up the Options Boys.)
-The yield on the 10-year Treasury was up slightly to 2.34%.
I keep reading comments that we are in an up-trend. I am not sure about that. In fact, the data says otherwise: the S&P 500, the I-Shares Russell Mid Cap (IWR) and the Wilshire 2000 Small Cap Index (IWM) are all lower than they were 6-months ago. That is the definition of a downtrend for some technical analysts.
The S&P 500 is now less than 1% above its 200-dMA. It will be important to see if that can hold above the 200-dMA.
Monday was a statistically significant down-day and that means simply that the price-volume move exceeded my statistical parameters and, in about 62% of the time, that leads to an up-day the next day. We’ve also had 4-straight down-days so expect a bounce Tuesday; however, my longer term guess is that the market moves down over the next couple of weeks.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 48.5% Monday vs. 50.3% Friday. (A number below 50% is usually BAD news for the markets. On a longer term, the 150-day moving average of advancing stocks dipped to 49.3%. (Lowry Research considers the 150-day advance-decline time frame to be a critical measure of market health.) The McClellan Oscillator (a Breadth measure) remained negative Monday.
New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-58. (It was minus-21 Friday.) The 10-day moving average of the change in spread was -6 Monday. In other words, over the last 10-days, on average; the spread has decreased by 6 each day. The internals switched to negative on the markets.
NTSM
Monday, the NTSM long term indicator was BUY. Price and VIX indicators are positive. Volume and Sentiment are neutral. I am not following this guidance for the time being; I am waiting for a better entry point. I am getting tired of repeating this, but a pullback may be in the works.
I will wait
before increasing stock holdings; I think there will be a better entry point.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I rather impulsively sold all stocks in my retirement account (it was already down to 30%-stocks) which sets it at 100%-G fund (cash) as of Friday. I am not sure that this makes sense for most people, but as a retiree, I can’t make up losses so I am getting even more conservative than usual. We are reasonably close to the top now and appear to be stalling again, so I don’t see much upside unless the Index can break out higher. If it does break higher, I’ll get back in. Otherwise, being out gives me a small opportunity to make a bit more on a pullback. There is a risk of even more under-performance by doing this since it is nearly impossible for me to call a buy on a higher low unless there are clear reversals. Clear reversals aren’t likely at a higher-low. As I said, it was an impulsive move. Keeping 30% invested hedges the bet; what was I thinking? Well, there is a risk that the market re-tests the 25 August low.
If you want to reduce stock investments, there will be opportunities (maybe tomorrow or later in the week) as the market rebounds and tries to make it back to the recent high once again.
G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 100%
