Wednesday, April 6, 2016

Crude Inventories … FOMC Minutes … Stock Market Analysis

CRUDE INVENTORIES (24/7 Wall Street)
“The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 4.9 million barrels last week…” Story at…
“Federal Reserve policymakers debated last month whether an interest rate hike would be needed in April though a consensus emerged that risks from a global economic slowdown warranted a cautious approach.” Story at…
Initially, the S&P 500 fell after the release of the Fed minutes, but the Index recovered in the last hour of the day.
-Wednesday, the S&P 500 was up about 1% to 2067 at the close.
-VIX fell about 9% to 14.09.
-The yield on the 10-year Treasury rose to 1.76%
The size of the down-move Wednesday was statistically-significant and that means that the price-volume move up exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Thursday). This is the 2nd statistically-significant day in a row and that is the type of action normally seen at a top. Investors are confused.  Unchanged volume was also high today and that reinforces the “confused-investor” view.  Confusion usually signals a top.  Reversals at a bottom are faster – at the top, confusion reigns.  Whether that will be the case this time remains to be seen.  Until recently, we have seen a lack of big moves, but there have been other topping indicators that I have mentioned recently.
The short-term Money Trend indicator remains negative on the market and suggests further downside ahead, but a few more days like today will reverse the signal.  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) jumped up to 51.2% Wednesday. It was 48.4% Tuesday. (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 51.2%. 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) improved, but remains negative on the markets.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +114 Wednesday. (It was +80 Tuesday.)   The 10-day moving average of the change in spread climbed to +5. In other words, over the last 10-days, on average; the spread has increased 5 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.
Wednesday, Price & VIX were positive. Sentiment & Volume were 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) that suggest a top has occurred.  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…