Thursday, March 10, 2016

Unemployment (Jobless) Claims … VIX Death Cross Suggests Stock Market Crash … Stock Market Analysis

“The number of Americans filing for unemployment benefits fell more than expected last week, hitting its lowest level since October, pointing to sustained strength in the labor market that should further dispel fears of a recession.    Initial claims for state unemployment benefits declined 18,000…” Story at…
[Russell Rhoads, head of education at the CBOE’s Options Institute] “…sees the VIX’s shorter-term moving average move above its longer-term moving average…as bad news for the market… the VIX’s 1-year moving average pushed above its 5-year average. “The last time his happened back in 2007, a year later, the S&P 500 was down about 40%...” Story at…
-Thursday, the S&P 500 was up about 1pt to 1990 at the close.
-VIX was down about 1.6% to 18.05.
-The yield on the 10-year Treasury rose to 1.93%.
Today, Thursday, was a wild day with the market up nearly 1% at the open; down nearly 1% mid-day and a close about even. Investors seem confused and that is borne out by some unusually high unchanged-volume readings recently. I used to track this stat because some of the old-school guys placed a predictive value on it. I finally decided big values seemed to indicate reversals, but the direction wasn’t always evident so I gave up. (High values were supposed to indicate tops.) Be that as it may, it does indicate a level of investor confusion, but that should be evident from the price changes today.
The Overbought/Oversold Ratio remained “Overbought” Thursday for the thirteenth day in a row. RSI was “Overbought” a week ago.  Both are short-term bearish for the markets.
The S&P 500 remained 1.6% below the 200-dMA; the slope of the 200-dMA remains down. The Index remains in a down trend.
Market Internals continue to deteriorate; this is stealth deterioration and when the market figures that out, the indices are likely to fall. Today, only 43% of stocks advanced and that is probably an indication that Friday will be a down-day.  The index usually catches up to the majority – today, the majority was down.
The short-term Money Trend indicator is still suggesting downside ahead. It has been dropping for 7-straight days. The S&P 500 is unchanged over this time frame. I still am holding short positions in SH and QID. So far, these trades aren’t working.
(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 60.8% Thursday vs. is 63.9% Wednesday. (A number above 50% is usually GOOD news for the markets.) On a longer term, the 150-day moving average of advancing stocks dipped to 50.1%. 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) was lower, but remained positive.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +66 Thursday. (It was +88 Wednesday.)   The 10-day moving average of the change in spread fell to +2. In other words, over the last 10-days, on average; the spread has INCREASED by 2 each day. Market Internals switched to neutral on the markets due to falling up-volume.

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 & VIX were positive. Sentiment & Volume were neutral. The long-term NTSM indicator is BUY. I have not followed the guidance yet. My guess is that the Index is topping out; today all indicators deteriorated.  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…