Wednesday, April 20, 2016

GDP … Crude Inventory … Bear Market Over … Stock Market Analysis

GDPNow (Atlanta FED)
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.3 percent on April 19, unchanged from April 13.
Chart from…
“Crude Inventory +2.08M Barrels vs +2.3M Expected” Details at…
BEAR MARKET OVER…SORT OF (Real Investment Advice)
“Let me be VERY CLEAR – this is VERY SHORT-TERM analysis. From a TRADING perspective, there is a tradable opportunity being developed. This DOES NOT mean the markets are about to begin the next great secular bull market. Caution is highly advised if you are the type of person who doesn’t pay close attention to your portfolio or have an inherent disposition to “hoping things will get back to even” if things go wrong rather than selling.” – Lance Roberts. Commentary at…
-Wednesday, the S&P 500 was up about 0.1% to 2102 at the close.
-VIX rose about 0.3% to around 13.28.
-The yield on the 10-year Treasury jumped to 1.85%.
The S&P 500 is again overbought using the old tried and true Overbought/Oversold Ratio (utilizing advance decline data), but the elusive pull-back I have expected seems to remain out of reach. The Index is not just overbought, it is still massively overbought - the percentage of stocks-advancing on a 10-dMA (day moving average) and 20-dMA basis is exceeding the year-2010 top…right before a 16% correction.
I have a top indicator or two suggesting a top, but most indicators are very positive so perhaps this puppy will continue to creep higher.  It hasn’t closed above my buy point yet (2110) so I am still waiting to get back in, at least at a small percentage.
The short-term Money Trend indicator is mixed, so no clear signal.  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 above.
(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) rose to 61.2% Wednesday. It 63% Tuesday. (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 52.0%. A value above 50% generally indicates an up-trend and the numbers suggest a long-term up-trend.  The problem is that there remains a lot of doubt about the status of the markets and whether they can make significant new-highs.  The McClellan Oscillator (a Breadth measure) was down, but remained positive on the markets.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +131 Wednesday. (It was +187 Tuesday).   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 positive 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, 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 have suggested that the Index has topped out.

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 10-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…