Wednesday, May 25, 2016

Crude Inventories … This is A False Rally in the stock Market …. Trump Could Win … Stock Market Analysis

“U.S. crude inventories slumped last week, the biggest weekly drop in seven weeks, as imports dropped and refiners cut output, while gasoline stocks soared ahead of the start of the U.S. driving season, the government said on Wednesday.
Crude inventories fell 4.2 million barrels in the week to May 20, compared with analyst expectations for an decrease of 2.5 million barrels…” Story at…
“Looking at a chart of the TLT long-term bond ETF versus the S&P 500, Gordon [Todd Gordon, Founder,] noted that as stocks move higher the ETF has not broken its respective support level. "We'd like to see the TLT pushing lower indicating that the market is driving out of the safety of bonds and into stocks," said the founder of "[Investors] are holding their bond positions and I think that indicates a false breakout in the S&P," he said. Story at...
My cmt: It may be, but my indicators are now leaning bullish, at least in the short-term.
TRUMP COULD WIN (Global Economic Perspective)
“I believe Trump will win the rust belt states of Michigan, Indiana, and Ohio. If so, Hillary will need a clean sweep of about every remaining state to win.” – Mike Shedlock, Global Economic Perspectives.
My cmt: Mike says that he is strongly opposed to Trump’s protectionist plans for the economy, but that policy is supported by rust-belt voters where Trump is likely to beat Clinton. So we have a sad election looming. Just consider our 3-remainig candidates: A arrogant business man who has neither the personality nor the temperament to be President; a lying Politician with little respect for rules or the law; a Socialist.
-Wednesday, the S&P 500 finished up 0.7% to 2091 at the close.
-VIX dropped about 4% to 13.90.
-The yield on the 10-year Treasury was up slightly to 1.87%.
Average daily-volume for the month of March was 4,209,000,000 shares on the NYSE.  Today’s volume was 3,850,000,000 about equal to the volume over the past month. Put in perspective, current volume is about 10% lower this month than last.  Volume normally picks up in a rally, but this rally may be getting old.
As we approach recent new highs (around 2100) we note that only about 3.4% of stocks on the NYSE made new-highs Wednesday.  That’s an extraordinarily low number especially when one considers that 5-weeks ago the S&P 500 climbed to 2102 with 4.3% of stocks making new-highs.  By that measure, market conditions have gotten worse since April, not better. 
On the bullish front, crude prices have continued their recovery and one wonders whether the stock market can manage new highs on the leadership of crude. Indicators reversed and today are mostly bullish. It looks like the Index may try to test the 2100 area again.  If it gets much higher, traders will get more bullish.
The short-term Money Trend indicator jumped to the upside, Wednesday, and that’s clearly a bullish signal.  I continue to hold short positions mostly in SH and some in QID. 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) jumped to 53.1% Wednesday. It was 49.9% Tuesday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks improved to 51.6%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) switched to positive – a bullish indicator in the short-term.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +93 Wednesday. (It was +83 Tuesday).  
The 10-day moving average of the change in spread was minus-2. In other words, over the last 10-days, on average; the spread has decreased by 2 each day. Market Internals switched to neutral on the markets. Any further improvement will send a bullish signal in the Market Internals indicator.

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.
Wednesday, the Volume, VIX & Sentiment indicators were all neutral.  The Price indicator (measuring the size of up vs down moves) was positive. 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 2015 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…