Thursday, April 7, 2016

Jobless Claims … Bond Traders Betting Yields will Rise … GE: Destroying the Fabric of America … Markets at Critical Juncture … Stock Market Analysis

“Fewer Americans sought unemployment aid last week, evidence that employers are holding onto their workers despite signs of weak growth. Applications for U.S. jobless benefits fell 9,000 to a seasonally adjusted 267,000…” Story at…
My cmt: The general consensus remains that the FED will not raise rates in April.
BOND TRADERS BETTING YIELDS WILL RISE (McClellan Financial Publications)
“Commercial traders of T-Bond futures have been increasing their net short position in a big way in recent weeks…The curious point about this is that we are also seeing sentiment indications for the stock market showing a topping condition.” Commentary at…
The point is that falling bond prices usually occur with rising stocks.  Who is right? Tom McClellan doesn’t have an answer, but he has been bearish this year.
“We at GE were interested to read comments Monday by Sen. Bernie Sanders (I-Vt.), who told the New York Daily News editorial board that GE is among the companies that are supposedly “destroying the moral fabric” of America. The senator had been asked to cite examples of corporate greed at its worst. Somehow that got him to talking about us…Sanders has stated many times that GE pays no taxes. Repeating a lie over and over does not make it true. We pay billions in taxes, including federal, state and local taxes. The U.S. tax system has not been updated in 30 years and isn’t designed for today’s economy, which is why we support comprehensive tax reform — even if it raises our tax rate.” - Jeffery Immelt (GE CEO). Read the full response to Sanders at…
“The S&P 500 chart with the Profit Factor indicator for a period of 250 days shows the persistent decline in market strength since the beginning of 2014 and how crucial it is for the index to stay above current levels…Although the indicator cannot say much about the future course, it can nevertheless warn that this is not the time for adding to risk.” Commentary at…
-Thursday, the S&P 500 was down about 1.2% to 2042 at the close.
-VIX rose about 15% to 16.16.
-The yield on the 10-year Treasury fell to 1.69%
The size of the down-move Thursday was statistically-significant and that means that the price-volume move down exceeded my statistical parameters and, in about 60% of the time, that leads to an up-day the next day (Friday). As I noted yesterday, these up-and-down, big-move reversals are usually a topping signal. I have seen other topping signs (Money Trend, falling Up-volume & Breadth Topping Indicator) so I expect the markets to move generally down from here for at least a 5% drop. Longer-term it’s going to depend on investor reaction to earnings.
The short-term Money Trend indicator remains negative on the market and suggests further downside ahead.  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) dipped to 50.9% Thursday. It was 51.2% Wednesday. (A number above 50% is usually GOOD news for the markets.)
On a longer term, the 150-day moving average of advancing stocks remained 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) dropped and remains solidly negative on the markets.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +62 Thursday. (It was +114 Wednesday.)   The 10-day moving average of the change in spread slipped to +1. In other words, over the last 10-days, on average; the spread has increased 1 each day. Market Internals switched to positive on the markets. There were 2 reasons: (1) the 10-day moving averages are dependent on what happened 10-days ago and that is skewing data to the positive side today (2) New-hi/new-low data has hung in there without too much deterioration. A few more days should clarify internals.

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 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…