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…
Most pundits think the economy will be better in Q2 due to weakening of the dollar and rising energy prices.
“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…
-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.
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.
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.
Thursday, VIX, Sentiment, Price & Volume were all neutral.  The long-term NTSM indicator is HOLD.

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…