“…the Consumer Price Index (CPI), came in at 0.4% on the headline report...the core CPI, which excludes food and energy…rose by 0.2%, in line with expectations.
…year-over-year …The headline CPI was up 1.1% from April of 2015, but the core reading was up a sharp 2.1% from a year earlier.”
My cmt: These numbers look high to me given that gasoline prices were down year-over-year. For more, see Doug Short’s analysis at…
“Construction on new houses rebounded in April after a sharp dip in the prior month, but a slowdown in building permits suggest work on new properties could taper off from last year’s double-digit pace.” Story at…
INDUSTRIAL PRODUCTION (ABC News)
U.S. industrial production in April posted the biggest increase since November 2014 as utility output surged, the Federal Reserve said Tuesday.” Story at…
My cmt: The article pointed out that much of the increase was due to increased production by utilities associated with a return to cooler weather after an unusually warm March.
CHINA ECONOMIC DATA DISAPPOINTS (BBC News)
“China's National Bureau of Statistics said on Saturday that industrial output rose 6% year-on-year in April, compared with 6.8% growth the month earlier. Fixed-asset investment grew by 10.5% in the January-to-April period, compared with an increase of 10.7% the year before. Retail sales grew by 10.1% in April from a year earlier. They all missed market expectations. Vishnu Varathan from Mizuho bank said the activity data raised concerns about China's renewed slowdown and exacerbated "woes about global demand deficiency".
LACKER SAYS CASE FOR JUNE FED HIKE IS STRONG (CNBC)
“The case for an interest-rate increase in June “looks to be pretty strong,” said Richmond Fed President Jeffrey Lacker on Monday…The Richmond Fed president is not a voting member of the Fed policy committee this year. He has been one of the most forceful advocates in the central bank for hiking rates.” Story at…
My cmt: With inflation picking up, it would seem possible, but still un-likely for June.
TIME TO SHORT (CNBC)
Monday, Raoul Paul, founder of Global Macro Investor said on CNBC’s “Fast Money” show that it was time to get short the market. He recommended using stops to limit losses.
MARKET REPORT / ANALYSIS
-Tuesday, the S&P 500 fell about 1% to 2046 at the close.
-VIX rose about 6% to 15.57.
-The yield on the 10-year Treasury rose to 1.76%.
Tuesday, we had another big move down. The size of the down-move was statistically significant and that means that the price-volume move exceeded my statistical parameters and, in about 60% of the time, that leads to an up-day the next day (Wednesday). This is the seventh statistically significant day in the past 3-weeks. As I’ve noted recently, these up/down moves tend to happen near tops, so this flip/flopping (3-days-up and 4-days-down) is a bearish indication.
The last time the S&P 500 experienced 7-statistically significant days in a 3-week period was in December 2015. The market fell 9% in the following 3-weeks so it's hard to be bullish now.
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator is drifting up, Tuesday, a bullish signal. This is due to the 10-day moving average used in this indicator. 11-days ago was worse than today, so the indicator improved even though today was a down day.
I continue to hold short positions mostly in SH and some in QID, but those will have to go if the market reverses upward and exceeds my pain-target of 2110 on the S&P 500.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 50.5% Tuesday. It was 49.3% Monday. A number above 50% is usually GOOD news for the markets, but again, my 10-day averages may be giving a false signal today.
On a longer term, the 150-day moving average of advancing stocks dipped to 51.4%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) declined and remained negative – a negative indicator in the short-term.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +75 Tuesday. (It was +148 Monday). The 10-day moving average of the change in spread was +1. In other words, over the last 10-days, on average; the spread has increased by 1 each day. Market Internals remained neutral on the markets.
Tuesday, the Volume, VIX, Sentiment & Price indicators were all neutral. The long-term NTSM indicator remains 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 12-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…