Friday, November 13, 2015

Retail Sales … Producer Price Index … Michigan Sentiment …Another Bear Market Signal … Stock Market Analysis

RETAIL SALES WEAK (Reuters)
“U.S. retail sales rose less than expected in October amid a surprise decline in automobile purchases, suggesting a slowdown in consumer spending that could temper expectations of a strong pickup in fourth-quarter economic growth.” Story at…
My cmt: Retail sales were only up 0.1% vs. a forecast of 0.3%.  After Macys and Nordstrom earnings reports earlier in the week, this was not a surprise.
 
PRODUCER PRICE INDEX (CNBC)
“The Labor Department said on Friday its producer price index fell 0.4 percent last month after falling 0.5 percent in September.” Story at…
http://www.cnbc.com/2015/11/13/us-producer-price-index-october-2015.html
 
MICHIGAN SENTIMENT (Bloomberg)
“The University of Michigan’s preliminary consumer sentiment index for this month rose to 93.1, a four-month high…” Story at…
http://www.bloomberg.com/news/articles/2015-11-13/consumer-sentiment-climbs-as-americans-buoyed-by-price-discounts
 
ANOTHER BEAR MARKET INDICATOR: IT LOOKS LIKE A TOP; DOES IT QUACK LIKE A TOP?… (StreetTalkLive)
Here’s Lance Roberts chart of the S&P 500 with RSI above and a MACD (moving average convergence/divergence) chart below the S&P chart. It shows a very large head and shoulders pattern and a rounded top suggesting more trouble ahead for the markets. On Lance’s page he posted this under the title, “Weekend Reading” and there was a lengthy list of links and discussion in addition to the chart below. Good reading!

“There is little evidence currently that the rally over the last couple of months has done much to reverse the more "bearish" market signals that currently exist. Furthermore, as noted by Jochen Schmidt, the current market action may be more indicative of market topping process." Chart and commentary at….
http://streettalklive.com/index.php/blog.html?id=2974
 
MARKET REPORT / ANALYSIS        
-Friday, the S&P 500 was down about 1.1% to 2023 at the close.
-VIX was up about 9% to 20.08. (VIX is up 30% in 3-days. Someone woke up the Options Boys.)
-The yield on the 10-year Treasury dipped to 2.28. (Someone woke up the Bond Ghouls.)       
 
The S&P 500 Index finished 2% below the 200-dMA, Friday so that potential level of support appears to be gone.
 
Friday was another statistically significant down-day and that means simply that the price-volume move exceeded my statistical parameters and, in about 60% of the time, that leads to an up-day the next day. We’ve also had 7 down-days in the last 8, so expect a bounce. It didn’t happen Friday, so maybe Monday; however, my longer term guess is that the market moves generally down for a bit more.  A 50% down retracement would put the market at about 1990, S&P 500. The 50-dMA is 2008 so both of those levels should be watched for a possible buy signal.  

VIX has exploded up 30% in the last 3-days so a retest on the 25 August low is always possible. I would prefer a retest because I would have a better chance to determine a buy-point.  Higher-lows are an enigma.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 44.3% Friday vs. 46% Thursday.  (A number below 50% is usually BAD news for the markets.  On a longer term, the 150-day moving average of advancing stocks slipped to 48.9%. (Lowry Research considers the 150-day advance decline time frame to be a critical measure of longer-term, market health.) A value below 50% indicates a down trend.
 
The McClellan Oscillator (a Breadth measure) remained negative Thursday.
 
New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-195. (It was -170 Thursday.)   The 10-day moving average of the change in spread was minus-21 Friday.  In other words, over the last 10-days, on average; the spread has decreased by 21 each day.  The 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         
Friday, the NTSM long term indicator was HOLD. The Price indicator is positive.  VIX and Sentiment are neutral. Volume is negative.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
All cash: G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 100%
For my reasons (or lack of reason) see “My Invested Stock Position” in my prior blog at...
http://navigatethestockmarket.blogspot.com/2015/11/factset-earnings-cass-freight-index.html
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