Tuesday, February 2, 2016

Auto Sales … Car Auction Prices Fall … Nine-to-One Up Days … Stock Market Analysis

AUTO SALES (Reuters)
“U.S. auto sales appeared to fare better than expected in January as the industry benefited from low gasoline prices, easy credit and moderate economic growth, preliminary results showed on Tuesday.” Story at…
“The nation's largest car auction posted its first sales decline since 2010, with sales of everything from muscle cars to vintage European racers beginning to slow. The auction sales in Scottsdale, Arizona — the largest auto auction in the U.S. by volume — totaled $251 million compared to $294 million last year. The 15 percent decline was the first drop in total sales since 2010, after the financial crisis. The price of an average sale also fell, declining 13 percent to $100,588 from $115,729 last year.” Story at…
…and the Shelby Cobra 427 Competition Roadster went for $2.4-mil, out of my price-range by about $2.4-mil.
NINE TO ONE UP DAY (MarketWatch)
“Friday’s stock market action was so strong that it triggered a “buy” signal from a technical indicator that used to have a wide following on Wall Street. I am referring to what the late Martin Zweig, the investment newsletter editor and mutual fund manager, called a “nine-to-one up day.” Such a session occurs when “up” volume in stocks on the New York Stock Exchange leads “down” volume by at least a nine-to-one margin.”- Mark Hulbert, editor of the Hulbert Financial Digest. Story at…
Mark Hulbert suggests that the indicator may be worth watching now, because it is less watched. I have studied this indicator, but I haven’t yet figured out how to use it well.  As Mark Hulbert suggests, it used to be a straight forward BUY signal if there was a 9 to 1 up-day. Now, and specifically regarding last Friday, it is far less clear that a 9 to 1 up-day should be a buy signal.  Most importantly, there was no opposite indicator at the recent bottom. At the bottom, I would like to have seen a day when down volume exceeded up volume 9 to 1. If we had seen a 9 to 1 down-day, an immediate reversal to the upside would have had more significance. To further confuse the issue, there have been three 9 to 1 up-days and two 9 to 1 down-days since December so the indicator is not exactly sending a clear signal.
“JPMorgan strategist Mislav Matejka declared an end to seven years of ‘buying the dip’ as he turned bearish on stocks. ‘We were positive on equities for quite a long time,’ Matejka said in a January ‘Trading Nation’ interview. ‘But we think structurally, this regime is coming to an end, and the regime that we should be having now is one of selling any rallies.’"  Story at…
My cmt: This article recommended buying on days when the market is down more than 5%.
-Tuesday, the S&P 500 was down about 1.9% to 1903 at the close.
-VIX jumped about 10% to 22.01.
-The yield on the 10-year Treasury fell to 1.86%.
“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
The Overbought/Oversold Index, AKA the Advance-Decline Ratio (a Wall St. “classic” indicator based on breadth) has cleared its oversold reading and is now neutral Tuesday. 
My guess of 1950 as the high of this bounce is looking pretty close since the Index got to 1940.
Tuesday’s big move down was not enough to trigger my “statistically-significant” indicator, but it was big enough so that most traders probably won’t care about my opinion - Wednesday may be “up” as a result and it could follow-thru for week or two. I don’t think it will break 1940.
After the rally’s end, we’ll need to re-test the 1859 low.  If past history holds, that would occur in 1 to 7-weeks after the low. (Those are wide-ranging numbers from looking at 4 corrections with steep declines.) It’s already been more than a week after the low so that scenario is off the table.
My Money Trend indicator is mixed Tuesday. It has been a pretty good indicator recently.
Friday, I took a short position at the close. I sold my 2x short position at the close Tuesday for almost a 4% gain. We’re due for some upward movement so it was a gut move amplified by Tuesday’s big down-day that is sometimes followed by big up-days. In addition, my Market Internals measure remains positive – I don’t like to bet against it for long.
If there is a better signal Wednesday, I’ll probably go long Wednesday for the next trade.
(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 54.4% Tuesday vs. 55.6% Monday.  (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks rose to 48.9%. A value below 50% indicates a down trend. The McClellan Oscillator (a Breadth measure) declined slightly, but remained positive.
In a negative reversal New-lows outpaced New-highs. The spread (new-highs minus new-lows) was minus-56. (It was +50 Monday.)   The 10-day moving average of the change in spread dropped to +64.  In other words, over the last 10-days, on average; the spread has INCREASED by 64 each day. Market Internals remained positive 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.
Tuesday, the VIX indicator was negative. The Volume, Price & Sentiment indicators were neutral. The long-term NTSM indicator is HOLD.

On 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). Friday, 15 Jan I reduced stock allocation to zero in long-term accounts. That leaves 100% invested in cash yielding about 2%.  Short-term bonds would be OK too.
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 8-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…