Thursday, April 21, 2016

Payroll Claims (Unemployment Claims) … Philadelphia FED … Leading Economic Indicators (LEI) … Stock Market Analysis

“New applications for unemployment benefits sank to the lowest level in 42 years, pointing to continued improvement in the labor market. Initial claims fell by 6,000 to 247,000 in the seven days ended April 16…” Story at…
PHILADELPHIA FED (24/7Wall Street)
“…April’s General Business Conditions Index fell to −1.6. This represents economic contraction…Bloomberg’s consensus estimate was calling for the General Conditions Index to drop to 9.0 in April.” Story at…

Charts, analysis and commentary available from…
Microsoft missed earnings with revenues down 5% - Microsoft fell 4% after hours; VISA fell 5% after its earnings announcement; Alphabet (formerly Google) fell 6% after reporting; Starbucks too was not a good news story – it was down 4% after-hours.
-Thursday, 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.
The Breadth vs. S&P 500 Topping Indicator is again signaling a top.  The Index is up 1.4% since the last time it signaled a top so this is just another indication that the Index has gotten ahead of itself and remains ahead of itself. Still, most indicators are very positive.
The S&P 500 hasn’t closed above my buy point yet (2110) so I am still waiting to get back into stocks, at least at a small percentage. With the Index at high levels it would be best to average in a little each month, unless there is a buying opportunity.
The short-term Money Trend indicator is up suggesting further upside for stocks.  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 62.6% Thursday. It was 61.2% Wednesday. (A number above 50% is usually GOOD news for the markets.)
On a longer term, the 150-day moving average of advancing stocks slipped to 51.7%. 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 +86 Thursday. (It was +131 Wednesday).   The 10-day moving average of the change in spread remained +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.
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 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…