Thursday, March 24, 2016

Jobless Claims … Durable Goods Orders … Sentiment too Bullish … Stock Market Analysis

“The number of Americans who applied for unemployment benefits in the mid-March was little changed at 265,000, reflecting the low level of layoffs taking place across the economy.” Story at…
“Bookings for goods and materials meant to last at least three years declined 2.8 percent after a 4.2 percent gain that was less the previously reported…” Story at…
SENTIMENT SWINGS TOO FAST (McClellan Financial Publications)
“The latest numbers out of Investors Intelligence show that bulls are now up to 47.4% in their survey of newsletter writers and investment advisors, and bears are now down to 27.8%.” Story at…
Tom McClellan’s commentary notes that sentiment as measured by Investor’s Intelligence has gotten too bullish too fast and that’s bearish for the market at this point. Ironically, the way I track sentiment is based on how investors in Guggenheim/Rydex funds are actually betting. The percentage of bulls in Rydex funds is falling, showing investors are getting more bearish. The Rydex signal is valuable at extremes; at other times, Rydex investors are often right.  I think the bearish side is right now.
- Thursday, the S&P 500 was down about 1pt to 2036 at the close.
-VIX dipped about 1% to 14.74 near the close.
-The yield on the 10-year Treasury rose to 1.90%
The markets exhibited pre-Holiday trading with low-volume and upward bias Thursday in anticipation of the NYSE closing tomorrow for Good Friday. There isn’t much to glean from the data.
Regarding my commentary from Sunday March 20 comparing the 2007 crash to the current correction: When I was rechecking numbers I noticed that in 2007 the market actually rallied 10% (after a small dip) to its top on day 213 before continuing down in its bear-market spiral.  That’s pretty much the same bounce that the S&P 500 just managed from its February low at day 209 of the current correction.
The short-term Money Trend indicator is trending down Thursday, but not sharply, suggesting a downtrend is prices. 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 55% Thursday vs. is 54.1% Thursday. (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 50.7%. A value above 50% indicates an up-trend since slightly more stocks have advanced over the last 150-days. The McClellan Oscillator (a Breadth measure) fell and remains negative.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +38 Thursday. (It was +51 Wednesday.)   The 10-day moving average of the change in spread rose to minus-3. In other words, over the last 10-days, on average; the spread has DECLINED by 3 each day. Market Internals remained neutral on the markets, but the new-high new low data is headed down and up-volume continues to fall. The only reason the Internals are positive is that Breadth is above 50%.

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, 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 the data remains bearish.  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…