Wednesday, March 30, 2016

ADP Employment … Crude Inventories … ADS Business Conditions Declining … Stock Market Analysis

“All indications are that the job machine will remain in high gear,” said Mark Zandi, chief economist of Moody’s Analytics, which prepares the report using ADP’s data.” Story at…
ADP said job growth was 200,000 overall.
“U.S. commercial crude inventories increased by 2.3 million barrels last week, maintaining a total U.S. commercial crude inventory of 534.8 million barrels. The commercial crude inventory stands at historically high levels for this time of year, according to the EIA.” Story at…

“The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data.” Chart from the Philadelphia FED at…
-Wednesday, the S&P 500 was up about 0.4% to 2064 at the close.
-VIX fell about 2% to 13.56.
-The yield on the 10-year Treasury rose to 1.83%
Volume remained low today, about 15% below the monthly average. Given that the month included Easter with its associated low volume, bulls must be concerned that volume has not picked up as this rally has progressed.  The norm is that volume starts low at a bottom, because traders don’t believe it, and then climbs as the rally gets going.  This time volume has remained low.  Currently, unchanged volume is very high – that shows some confusion on the part of investors. Up volume finally turned up, but will it remain up?  
The Overbought/Oversold Ratio remained “Overbought” Wednesday and RSI (Relative Strength Index) was again overbought.
My Breadth Index Top Indicator tracks breadth vs. the S&P 500. It turned negative today. It called the top in May, July, November and December 2015 and July, September and November of 2014. In other words, it has been very reliable recently. I’d say the top is very near if not today.
The short-term Money Trend indicator is neutral at this point. I continue to hold short positions mostly in SH and some in QID.
(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) is 59.7% Wednesday vs. is 56% Tuesday. (A number above 50% is usually GOOD news for the markets.)
On a longer term, the 150-day moving average of advancing stocks climbed to 51.8%. A value above 50% generally indicates an up-trend, but the slope of the 200-dMA is still down, so the trend must still be considered down. The McClellan Oscillator (a Breadth measure) was higher and remained positive.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +213 Wednesday. (It was +194 Tuesday.)   The 10-day moving average of the change in spread rose to +17. In other words, over the last 10-days, on average; the spread has INCREASED by 17 each day. Market Internals switched to 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.
Wednesday, Price, Volume & VIX were positive. Sentiment was neutral.  The long-term NTSM indicator is BUY. I have not followed the guidance yet. My numbers suggest that the Index is topping out. I have been saying that for a while as the market has moved up; but there are some topping indicators (RSI & the Breadth Index Top Indicator suggest top real soon.  We’ll see.

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) and on 15 Jan I reduced stock allocation to zero in long-term accounts.
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 10-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…