Thursday, April 14, 2016

FED Beige Book … CPI … Jobless Claims … Inventories and Sales (Never this Bad Outside a recession) … Stock Market Analysis

“… Wednesday’s Federal Reserve Beige Book reports that the U.S. is experiencing ongoing slow economic growth. The Federal Reserve’s report on economic conditions around the country said growth was “in the modest to moderate range” in most of the 12 districts and was expected to stay that way going forward.” Story at…
CPI (Business Insider)
The consumer price index (CPI) rose less than expected in March, according to the Bureau of Labor Statistics. The gauge of inflation and prices paid by consumers rose 0.1%.” Story at…
“The number of Americans filing applications for unemployment benefits unexpectedly declined last week to match a more than 42-year low, indicating employers are upbeat about an economy that bogged down in the first quarter. Jobless claims dropped by 13,000 to 253,000 in the week ended April 9, equaling the level in March that was the lowest since November 1973…” Story at…
“On CNBC's "Squawk Box," he [oil expert, John Kilduff] said Sunday's meeting in Qatar of OPEC and non-OPEC producers on a possible output freeze was "one big joke" because of all the conflicting commentary from the various oil ministers. "This is going to be the mother of all 'buy the rumor sell the news' events here on Sunday. I think there's no way they come across with any kind of a deal or sufficient rhetoric to satisfy this rally right now," Kilduff said. "I think there will be a pullback starting next week." Story at…
In 6 Federal Reserve charts Mike Shedlock shows that Inventories and Sales are in bad shape. He concludes the charts show (quoting):
1. “Sufficient momentum for rate hikes as soon as April
2. It’s different this time!
3. One and Two
4. We are in recession
5. Don’t worry, it’s the weather
Commentary at…
BUGS AND WINDSHIELDS (Real Investment Advice)
“The year also a fitting point of reference because S&P 500 earnings were about the same then as they are today…To put it bluntly, investors today are paying an extra $450 per share for less… The question investors should therefore contemplate is why pay such a high premium today for something that in all likelihood is not nearly as valuable as it was in 2013?” – Michael Lebowitz, 720 Global Research. Commentary at…
My cmt: This was an excellent piece that covered several topics in addition to stock valuation. After reading it, I had to ask myself why anyone is bullish; but if the market keeps going up; we’ll all be bulls again.
-Thursday, the S&P 500 was up 1pt to 2083 at the close.
-VIX dipped about 1% to 13.72.
-The yield on the 10-year Treasury rose slightly to 1.78%.
Perhaps today the S&P 500 finally ran out of steam.  It is not unusual to have a small up-day after a large up-move, only to be followed by a retreat, especially when the charts look toppy as they do now. The statistically-significant, big up-days on Tuesday and Wednesday were likely caused by the last of the short-sellers giving up. I saw a lot of 4-letter words (actually 3-letters with an * or # as the fourth letter) on Tuesday & Wednesday on the trader boards as traders caved and exited short positions. Now the path is clear for the smart money to take some profits – that may have started mid-day Thursday. (I try to keep in mind that I am a sheep - I just try to be an educated sheep.)
The short-term Money Trend indicator is neutral.  In spite of that, I continue to hold short positions mostly in SH and some in QID.  I expect a reversal down based on other indicators. I can’t say I will make a profit – at this point the goal is to minimize loss. (Note to self for the future: I will follow my numbers… I will follow my numbers… I will follow my numbers… I will follow my numbers…etc.)
(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) slipped to 53.9% Thursday. It was 55% Wednesday. (A number above 50% is usually GOOD news for the markets.)
On a longer term, the 150-day moving average of advancing stocks was up slightly to 51.6%. A value above 50% generally indicates an up-trend. The slope of the 200-dMA is now up, but it needs to stay there for a few days to confirm a trend change. The McClellan Oscillator (a Breadth measure) dropped, but remained positive on the markets.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +89 Thursday. (It was +105 Wednesday).   The 10-day moving average of the change in spread rose to minus-7. In other words, over the last 10-days, on average; the spread has decreased by 7 each day. New-hi/new-lo data appears to be turning down and that is a top indicator. 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.
Thursday, Price & VIX were positive. Sentiment & Volume were neutral.  The long-term NTSM indicator is BUY. I have not followed the guidance. Other short-term 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.  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. If the S&P 500 index moves up another 1%, say 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 10-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…