Wednesday, December 30, 2015

Home Sales Fall … Crude Inventories Rise … Stock Market Analysis

“Contracts to buy previously owned U.S. homes fell in November for the third time in four months, a signal that growth in the U.S. housing market could be cooling.
The National Association of Realtors (NAR) said on Wednesday its pending home sales index slipped 0.9 percent…” Story at …
“Inventories of U.S. commercial crude jumped by 2.6 million barrels in the week through Dec. 25, according to the Energy Information Administration.” Story at…
-Wednesday, the S&P 500 was down about 0.7% to 2063 at the close.
-VIX rose about 8% to 17.29.
-The yield on the 10-year Treasury dipped to 2.3.
“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
Market Internals remained neutral. The Overbought-Oversold Index (Advance-Decline Ratio) remains OVERBOUGHT  and has been for the past 3-days. This is negative for the bulls.
My new “Money Trend” indicator tracks Up-$ vs. Down-$ vs the S&P; it reversed down Wednesday and is now bearish.  That was the short-term signal I was waiting for so I dropped back to 30% invested with long-term money.
I am using short-term indicators for long-term money.  That may be too conservative for many, but at least it is a strategy. This way I am out of the market at the first sign of trouble. Be warned though: unless there is a correction, this strategy will underperform a buy-and-hold strategy.
(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 57.6% Wednesday vs. 62.5% Tuesday.  (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks dropped 49.1%. A value below 50% indicates a down trend.
The McClellan Oscillator (a Breadth measure) was still positive, but it moved down significantly.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +32. (It was +67Tuesday.)   The 10-day moving average of the change in spread was +20 Wednesday.  In other words, over the last 10-days, on average; the spread has INCREASED by 20 each day. Market Internals remained neutral Wednesday.

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.
Wednesday, Sentiment, Price, Volume & VIX indicators are neutral.

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.
See “Why the Bull Market May be Dead” in my 14 December blog at…