Tuesday, April 26, 2016

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

“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…
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…
…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…
"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…
The March number was down from February, but still positive year-over-year.
-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.
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.
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.
Tuesday, VIX was positive. Sentiment, Price & Volume were neutral.  The long-term NTSM indicator is HOLD reflecting recent weakness.

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…