Thursday, December 31, 2015

Chicago PMI Falls … Unemployment Claims Climb … This Isn’t a Bull Market … Stock Market Analysis

Markets are closed Friday – Happy New Year!
“Economic activity in the Midwest contracted at the fastest pace in more than six years in December, according to the Chicago Business Barometer, also known as the Chicago PMI. The index fell to 42.9 from 48.7 in November…” Story at…
“More Americans requested unemployment benefits last week, but the level remains near historic lows in a positive sign for the job market…Applications for jobless aid jumped 20,000 to a seasonally adjusted 287,000…”
WHAT BULL MARKET? (The Kindergarten)
“At present, just 28% of all NYSE names are in uptrends, or less than 1 in 3 stocks. That’s not a bull market.” – Josh Brown.  Commentary and analysis at…
-Thursday, the S&P 500 was down about 0.9% to 2045 at the close.
-VIX rose about 5% to 18.18.
-The yield on the 10-year Treasury dipped to 2.27.
“As an investor, you should remember that making money in the market is only one-half of the job. Keeping it is the other.” – Lance Roberts
Volume in the last hour was bigger than the volume in the first 5-1/2 hours. Unfortunately, down-volume was twice up-volume and the S&P 500 lost more than 6-points in the final hour of trading. The bulls must hope that these negatives don’t carryover to Monday. The first day of the month is usually an up-day since most mutual funds and retirement accounts are set to invest funds on the first.  It will be a bad sign for the markets if they aren’t positive on Monday.
My new “Money Trend” indicator tracks Up-$ vs. Down-$ vs the S&P; it reversed down Wednesday and was even more bearish Thursday. 
In a negative reversal, New-lows outpaced New-highs Thursday.  That is never a good sign for the markets.    
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 53.3% Thursday vs. 57.7% Wednesday.  (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks rose 49.2%. A value below 50% indicates a down trend.
The McClellan Oscillator (a Breadth measure) was still positive, but it moved down significantly.
New-lows outpaced New-highs. The spread (new-highs minus new-lows) was minus-11. (It was +32 Wednesday.)   The 10-day moving average of the change in spread was +6 Thursday.  In other words, over the last 10-days, on average; the spread has INCREASED by 6 each day. Market Internals remained neutral Thursday.
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.
Thursday, Sentiment, Price, & VIX indicators are neutral. Volume was negative and VIX was very close to a negative reading.  If the VIX climbs higher Monday I’ll probably have a Sell signal.  Since I already sold Thursday, a sell signal now won’t mean much to me, but a longer term sell signal now would be a bad sign for the markets.

On Wednesday, 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). The remaining 70% is invested in cash yielding about 2%.  Short-term bonds would be OK too. I remain bearish long-term.
I am using short-term indicators for long-term money.  That may be too conservative for many, but at least it is a strategy. Be warned: unless there is a correction, this strategy will probably underperform a buy-and-hold strategy.
See “Why the Bull Market May be Dead” in my 14 December blog at…