“Employers added more jobs than forecast in November, underscoring Federal Reserve Chair Janet Yellen’s confidence that the U.S. economy is strong enough to withstand higher borrowing costs. The 211,000 increase in payrolls followed a 298,000 gain in October…” Story at…
http://www.bloomberg.com/news/articles/2015-12-04/payrolls-in-u-s-increased-more-than-forecast-in-november
HOURLY EARNINGS (Business Insider)
“Average hourly earnings grew 2.5% between October 2014 and October 2015, the highest growth rate we have seen since the Great Recession.” Story at…
http://www.businessinsider.com/average-hourly-wages-october-2015-2015-11
LUMBER PRICES SUGGEST AN ECONOMIC DOWNTURN SOON (McClellan Publications)
“…we are, facing a likely start to Fed rate hikes at the Dec. 15-16, just as lumber is saying that a downturn in economic activity is coming…they appear to be finally getting around to doing the right thing, at the wrong time.” Commentary at…
http://www.mcoscillator.com/learning_center/weekly_chart/housing_starts_-_lumbers_message/
MARKET REPORT / ANALYSIS
-Friday, the S&P 500 rose about 2% to 2092 at the close.
-VIX fell about 18% to 14.83.
-The yield on the 10-year Treasury dipped to 2.28.
Friday was another statistically-significant day and that means simply that the price-volume move exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next session. Further, there have been 7- statistically-significant days in the past 3-weeks. The recent bouncing between strong advance and big declines in the S&P 500 is typical of tops; not necessarily a major top, but a top none the less. There have been a number of clues to suggest that this is a major top and my estimate is that the odds are 2 to 1 that the Bull Market Has Ended. See my discussion at…
http://navigatethestockmarket.blogspot.com/2015/11/stock-market-top-john-hussman-phd-2-to.html
For a day or two, it looked like the Russel 2000 small cap index was outperforming the S&P 500 and that would be good news. Unfortunately, that hasn’t been true recently; the Russell gained Friday, but it was a full 1% below the S&P 500 Friday. This continuing divergence is a very bad sign long term.
Other short term discussion follows:
The S&P 500 bounced 1.3% ABOVE the 200-Dma as it reflected the back and forth movement recently. The slope of the 200-dMA remains DOWN as of Friday; that is signaling the trend is down, whether it will be long-term remains to be seen. I have 2 indicators that have been very reliable recently, one based on breadth (but not the overbought/oversold ratio) and one based on smart-money; both are still suggesting further downside ahead.
New-high/new-low data was worse today even though the Market had a great day. That’s a bad sign for the market.
My guess remains that the market continues down. There are several possible support levels. The 50-dMA on the S&P 500 is 2037, but since that is below the 200-dMA it may be irrelevant. A 50% down retracement would put the market at about 1990. From the S&P 500 chart it looks like an important level is around 1930-1980. All of those levels will be watched for a possible buy signal. A retest of the 25 Aug low is still possible.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 51.2% Friday vs. 49.8% Thursday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks remained 49.2%. A value below 50% indicates a down trend.
The McClellan Oscillator (a Breadth measure) remained negative Friday.
New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-149. (It was -129 Thursday.) The 10-day moving average of the change in spread was -11 Friday. In other words, over the last 10-days, on average; the spread has decreased by 11 each day.
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. Sentiment, VIX & Volume are neutral. I remain skeptical that this is a good time to get in. My prior blog posts explain the reasoning. The market needs to break out higher before I will be convinced.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONAll cash: G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 100%
I made a rather impulsive sell decision. 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
There have been enough major top indicators recently to warrant more caution than usual.
One needn’t be “all-out” to be well protected if there is a bear market. In fact, I don’t recommend it. For example: With 30% invested in the stock market, one would only lose 15% of the portfolio if the market were to be cut in half; one would have plenty to invest at the bottom and 30% in stocks hedges the bet if the markets go up.
