Friday, April 29, 2016

Earnings … Personal Spending … Chicago PMI … Michigan Sentiment … Stock Market Analysis

EARNINGS – EXCERPTS FROM FACTSET EARNINGS INSIGHT
-“For Q1 2016, the blended earnings decline is -7.6%. If the index reports a decline in earnings for Q1, it will mark the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009.”
-“Looking at future quarters, analysts do not currently project earnings and revenue growth to return until Q3 2016.”
-“In aggregate, companies are reporting earnings that are 4.1% above expectations. This surprise percentage is slightly below both the 1-year (+4.2%) average and the 5-year (+4.2%) average.”
-“In terms of revenues, 55% of companies have reported actual sales above estimated sales and 45% have reported actual sales below estimated sales. The percentage of companies reporting sales above estimates is above the 1-year (50%) average but below the 5-year average (56%).” Earnings Insight available from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.29.16/view
My cmt: I’ve posted this before, but it’s important because unless the downward trend in earnings reverses significantly, the stock market is likely to fall. FACTSET has reported that analysts expect company earnings will return to growth by Q3 2016. I might point out that at the beginning of 2016 analysts were projecting a 0.3% INCREASE in earnings for Q1 2016. That current earnings number for Q1 is estimated at -7.6%, better than the estimate of -8.9% last week, but still not inspiring much confidence. An earnings recession is usually followed by a real recession.  Will this time be different?
 
PERSONAL SPENDING/INCOME (Investing.com)
“U.S. consumer spending rose less than forecast in March, while core PCE prices were in line with expectations, official data showed on Friday… personal spending increased by a seasonally adjusted 0.1% last month, worse than expectations for a 0.2% increase… Personal income, meanwhile, rose by a seasonally adjusted 0.4%, above forecasts for a 0.3% gain…” Story at…
http://www.investing.com/news/economic-indicators/u.s.-personal-spending-rises-0.1-in-march,-core-pce-prices-up-0.1-398890
My cmt: Personal spending rose by only 0.1% even though income rose by 0.4%. It appears that the consumer is still trying to reduce debt.
 
CHICAGO PMI (MarketWatch)
“A measure of Chicago-area economic activity softened in April, indicating that manufacturers and other large companies are still struggling to cope with lower exports, tepid global growth and even some weakness in the United States. The Chicago business barometer, or Chicago PMI, fell 3.2 points to 50.4 in April…” Story at…
http://www.marketwatch.com/story/chicago-pmi-falls-to-504-april-in-sign-of-economic-weakness-2016-04-29
My cmt: The article noted that a number above 50 indicates expansion, but also cautioned that the indicator has remained near 50 for more than a year.
 
MICHIGAN SENTIMENT (DailyJournal)
“The University of Michigan says American consumers were a bit more downbeat in April. The university's index of consumer sentiment slid to 89 in April from 91 in March. It is the lowest reading since September and the fourth straight drop.” Story at… http://www.dailyjournal.net/view/story/93617fcfca854752a0a199fc29157429/AP--US--Consumer-Sentiment
 
MARKET REPORT / ANALYSIS        
- Friday, the S&P 500 was down about 0.5% to 2065 at the close.
-VIX was up about 3% to 15.70.
-The yield on the 10-year Treasury dipped to 1.82%.
 
Friday couldn’t print a positive day even though it was the Last day of the month and a Friday too. Friday’s have been positive recently and the last day of the month is usually up due to mutual fund inflows associated with automatic retirement investments. This tendency can carryover for the first 4-days of a new month so we’ll see what happens next week.
 
As of Friday, the smart money (indicated by late-day movement in the S&P 500) has been buying at a slower rate for 6-weeks; further, there has been a slight tendency for selling over the last 20-days.  This is a negative indicator.
 
The S&P 500 remained overbought using the old tried and true Overbought/Oversold Ratio (utilizing advance decline data) & the Breadth vs. S&P 500 Topping Indicator signaled a top in late March and again last week. 
 
The 200-dMA of the S&P 500 is falling again, but the “Golden Cross” with the 50-dMa crossing above the 200-dMA remains. The Golden Cross is a bullish indication, but it has not generated much enthusiasm since it appeared 4-days ago. 
 
My snapshot sum of 16 indicators, of which only about half are included in the NTSM long-term or Market Internals trend followers that I mention regularly, is currently 0. It was +9 just 8-trading days ago. (I assigned +1 to bullish indicators and -1 to bearish indicators.) Except for big reversals, this isn’t a great indicator, but it does show recent market deterioration. All in all, there appears to be a slight downside bias indicated for next week.
 
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator was down, Friday, an indication that the S&P 500 is most likely to trend down in the near term.  The indicator flattened some, so the signal is not as strong today. I continue to hold short positions mostly in SH and some in QID, but those will have to go if the market exceeds my pain-target of 2110 on the S&P 500.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 56.4% Friday. It was 57.5% 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 52.2%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was down and switched to negative on the markets.
 
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +90 Friday. (It was +111Thursday).   The 10-day moving average of the change in spread rose to +1. In other words, over the last 10-days, on average; the spread has increased by 1 each day. New-hi/new-low data has turned down and is now suggesting further declines ahead. Overall though, Market Internals remained neutral 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.
 
NTSM         
Friday, VIX, Sentiment, Price & Volume indicators were all neutral.  The long-term NTSM indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION

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. If the S&P 500 index closes above 2110, I plan to add to my stock allocation.
 
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 11-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

Thursday, April 28, 2016

GDP … Unemployment Claims … Stock Market Analysis

GDP (Seattle Times)
“The U.S. economy inched forward at the weakest pace in two years from January through March, as consumer spending growth slowed, business investment plunged and exports declined further. The gross domestic product, the broadest measure of economic health, grew by a tiny 0.5 percent in the first quarter…” Story at…
http://www.seattletimes.com/business/us-gdp-growth-slowed-to-0-5-percent-rate-in-first-quarter/
Most pundits think the economy will be better in Q2 due to weakening of the dollar and rising energy prices.
 
UNEMPLOYMENT CLAIMS (MarketWatch)
“The number of Americans who applied for unemployment benefits last week rose by 9,000 to 257,000, but initial claims continued to cling near a four-decade low.” Story at…
http://www.marketwatch.com/story/us-jobless-claims-climb-9000-to-25700-2016-04-28
 
MARKET REPORT / ANALYSIS        
-Thursday, the S&P 500 was down about 0.9% to 2076 at the close.
-VIX jumped up about 11% to 15.22.
-The yield on the 10-year Treasury dipped to 1.84%.
 
As I suggested 2-weeks ago the FOMC announcement might bring some sell-the-news action and that’s what it looked like to me.  The trend in up-volume has been generally down for more than a month. It looks like the markets are running out of buyers.  When that happens markets fall.
 
The S&P 500 remained overbought using the old tried and true Overbought/Oversold Ratio (utilizing advance decline data) & the Breadth vs. S&P 500 Topping Indicator signaled a top in late March and again last week. 
 
The 200-dMA of the S&P 500 is falling again, but the “Golden Cross” with the 50-dMa crossing above the 200-dMA remains. 
 
My snapshot sum of 16 indicators, of which only about half are included in the NTSM long-term or Market Internals trend followers that I mention regularly, is currently 0. It was +9 just 7-trading days ago. (I assigned +1 to bullish indicators and -1 to bearish indicators.) Except for big reversals, this isn’t a great indicator, but it does show recent market deterioration.
 
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator remained sharply down, Thursday, an indication that the S&P 500 is most likely to trend down in the near term.  I continue to hold short positions mostly in SH and some in QID, but those will have to go if the market exceeds my pain-target of 2110 on the S&P 500.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 57.5% Thursday. It was 58.4% Wednesday. (A number above 50% is usually GOOD news for the markets.)
 
On a longer term, the 150-day moving average of advancing stocks slipped to 52.2%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was up and switched to positive on the markets.
 
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +111Thursday. (It was +118 Wednesday).   The 10-day moving average of the change in spread rose to +2. In other words, over the last 10-days, on average; the spread has increased by 2 each day. Market Internals remained neutral 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.
 
NTSM         
Thursday, VIX, Sentiment, Price & Volume were all neutral.  The long-term NTSM indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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. If the S&P 500 index closes above 2110, I plan to add to my stock allocation.
 
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 11-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

Wednesday, April 27, 2016

FOMC Rate Decision … Crude Inventories … China … Recession? … Stock Market Analysis

FOMC DECISION (MarketWatch)
“Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed…In light of the current shortfall of inflation from 2%, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” Press release at… 
http://www.marketwatch.com/story/text-of-april-2016-fomc-decision-2016-04-27
The FOMC declined to raise rates Wednesday as was widely expected. Language was seen by FED watchers as Dovish, effectively eliminating a rate-hike in June. It was noteworthy that the FED mentioned a slowing of the US economy.
 
CRUDE INVENTORIES (Reuters)
“The Energy Information Administration (EIA) said crude inventories climbed 2 million barrels to all-time peak of 540.6 million barrels for the week ended April 22.” Story at…
http://www.reuters.com/article/us-global-oil-idUSKCN0XO01U
 
CHINA
Apple’s China numbers were awful.  Revenues from China fell 26% year-over-year. Tim Cook, Apple CEO, had cautioned back in January that there were “signs of economic weakness” in China. This once again makes us question the near 7% GDP increase claimed by the Chinese government. Last month import/export data improved. This leads me to comment: bad numbers compared to worse numbers may be an improvement, but they are not good numbers. China remains in recession in my somewhat informed, un-schooled non-economist opinion. This isn’t good for US companies.
 
15 WARNING SIGNS OF A POSSIBLE MARKET TOP, RECESSION NEXT YEAR (Financial Sense)
http://www.financialsense.com/contributors/chris-puplava/growing-case-2016-market-top
My cmt: My simple recession indicator compares the S&P 500 index to the Industrial Select Sector SPDR ETF (XLI) because it is a cyclical ETF and should be more recession sensitive than the S&P 500.  Currently the XLI is out-performing the S&P 500 in all time frames; Investors don’t see a recession risk any time soon.
 
MARKET REPORT / ANALYSIS        
- Wednesday, the S&P 500 was up about 0.2% to 2095 at the close.
-VIX dipped about 1% to 13.77.
-The yield on the 10-year Treasury dropped to 1.86%.
 
Today’s small gain occurred after the FED announcement so it was positively received overall. Unless the economy picks up again (as predicted by economists), I don’t see a rate hike this year. I previously suggested this in the paragraph titled, ADS BUSINESS CONDITIONS NEGATIVE & FALLING (Philadelphia FED) here…
http://navigatethestockmarket.blogspot.com/2016/04/earnings-chicago-fed-cfnai-presidential.html
 
The S&P 500 is again overbought using the old tried and true Overbought/Oversold Ratio (utilizing advance decline data). The Breadth vs. S&P 500 Topping Indicator signaled a top in late March and again last week. 
 
The so called “Death Cross” (50-dMA lower than the 200-dMA) ended Monday so now it’s a “Golden Cross” with the 50-dMa crossing above the 200-dMA.  So far it hasn’t generated much excitement.
 
I decided to take a snapshot of 16 indicators, of which only about half fall in the NTSM long-term or Market Internals trend followers that I mention regularly. I assigned +1 to bullish indicators and -1 to bearish indicators.  Currently the sum of all 16 indicators is +1. It was +9 just 6-days ago. Except for big reversals, this isn’t a great indicator, but it does show recent market deterioration.
 
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator has turned sharply down, Wednesday, an indication that the S&P 500 is most likely to trend down in the near term.  I continue to hold short positions mostly in SH and some in QID, but those will have to go if the market exceeds my pain-target of 2110.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 58.4% Wednesday. It was 59.2% Tuesday ay. (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 52.3%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was up and switched to positive on the markets.
 
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +118 Wednesday. (It was +74 Tuesday).   The 10-day moving average of the change in spread rose to +1. In other words, over the last 10-days, on average; the spread has increased by 1 each day. Market Internals remained neutral 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.
 
NTSM         
Wednesday, VIX was positive. Sentiment, Price & Volume were neutral.  The long-term NTSM indicator is HOLD reflecting recent weakness.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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. If the S&P 500 index closes above 2110, I plan to add to my stock allocation.
 
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 11-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

Tuesday, April 26, 2016

Durable Goods … Consumer Confidence … Truck Tonnage UP … Stock Market Anaysis

DURABLE GOODS
“Orders for long-lasting U.S. manufactured goods rebounded less than expected in March as demand for automobiles, computers and electrical goods slumped, suggesting the downturn in the factory sector was far from over. The Commerce Department said on Tuesday that orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, increased 0.8 percent last month…” Story at…
http://www.reuters.com/article/us-usa-economy-durable-idUSKCN0XN1IC
My cmt: The consensus was 1.8 to 2% depending on who was making the forecast. Durable goods ex-transportation was more disappointing. It came in at -0.2% vs about a +0.5% expected.
 
Here’s a summary from Briefing.com…
“The Durable Goods Orders report for March was another disappointing piece of economic news, replete with downward revisions to the prior month's data.” For more see…
https://www.briefing.com/Investor/Calendars/Economic/Releases/durord.htm
…and Doug Short commented, “Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It came in flat MoM and -2.4% YoY.” Commentary at…
http://www.advisorperspectives.com/dshort/updates/Durable-Goods-Orders
 
CONSUMER CONFIDENCE (Nasdaq.com)
"Consumer confidence continued on its sideways path, posting a slight decline in April, following a modest gain in March," said Lynn Franco, Director of Economic Indicators at The Conference Board. "Consumers' assessment of current conditions improved, suggesting no slowing in economic growth. However, their expectations regarding the short-term have moderated, suggesting they do not foresee any pickup in momentum." – Conference Board. Press release at http://www.nasdaq.com/article/press-release-the-conference-board-consumer-confidence-index-declined-in-april-20160426-00947
Consumer Confidence came in below expectations and the S&P 500 began falling immediately. It may be too simplistic to say that Wall Street puts that much emphasis on Consumer Confidence.  One thing is out of sync though; usually when the stock market is up, so is confidence.
 
TRUCK TONNAGE UP (American Trucking Association, 19 Apr 2016)
“…Year-to-date, compared with the same period in 2015, tonnage was up 3.9%.” Press release at…
http://www.trucking.org/article.aspx?uid=41f688ea-9e41-4097-946e-25599ccebb72
The March number was down from February, but still positive year-over-year.
 
MARKET REPORT / ANALYSIS        
-Tuesday, the S&P 500 was up about 0.2% to 2092 at the close.
-VIX dipped about 1% to 13.96.
-The yield on the 10-year Treasury rose to 1.93%.
 
Apple turned in poor results and was down 8% in after-hours trading.  QQQ which is heavily influenced by Apple was down more than 0.5%. AT&T reported after hours and their stock was down 2% on disappointing results. Investors weren’t impressed with Corning either as it dropped 8%. There were some good reports; DuPont was up 2%; Container Store was up 18%; Pier1 was up 7% all on good earnings reports.
 
The so called “Death Cross” (50-dMA lower than the 200-dMA) ended Monday so now it’s a “Golden Cross” with the 50-dMa crossing above the 200-dMA.  So far it hasn’t generated much excitement.
 
The S&P 500 is again overbought using the old tried and true Overbought/Oversold Ratio (utilizing advance decline data). The Breadth vs. S&P 500 Topping Indicator is again signaling a top.  The Index is now only up 1% since the last time it signaled a top so this is just another indication that the Index has gotten ahead of itself. 
 
I decided to take a snapshot of 16 indicators, of which only about half fall in the NTSM long-term or Market Internals trend followers that I mention regularly. Currently the sum of all 16 indicators is +1. It was +9, 5-days ago. Except for big reversals, this isn’t a great indicator, but it does show recent market deterioration.
 
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator remains down, but not sharply, so it’s not a strong indicator Tuesday.  I continue to hold short positions mostly in SH and some in QID, but those will have to go if the market exceeds my pain-target of 2110.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 59.2% Tuesday. It was 59.4% 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 51.9%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was up and switched to positive on the markets.
 
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +74 Tuesday. (It was +33 Monday).   The 10-day moving average of the change in spread rose to minus-4. In other words, over the last 10-days, on average; the spread has decreased by 4 each day. Market Internals remained neutral 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.
 
NTSM         
Tuesday, VIX was positive. Sentiment, Price & Volume were neutral.  The long-term NTSM indicator is HOLD reflecting recent weakness.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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. If the S&P 500 index closes above 2110, I plan to add to my stock allocation.
 
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 11-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html