Monday, May 9, 2016

Earnings … Labor Market Conditions Fall … Stock Market Analysis

“With 87% of companies in the S&P 500 reporting earnings to date for Q1 2016…The blended (combines actual results for companies that have reported and estimated results for companies yet to report) year-over-year earnings decline for Q1 2016 is -7.1%, which is smaller than the expected earnings decline of -8.7% at the end of the quarter (March 31)…Looking at future quarters, analysts do not currently project earnings and revenue growth to return until Q3 2016. The forward 12-month P/E ratio is 16.5, which is above the 5-year and 10-year averages”
My cmt: I’ll point put again that at the beginning of 2016 analysts were projecting a 0.3% INCREASE in earnings for Q1 2016 - so much for analyst estimates.
For a discussion of the chart and series see…
-Monday, the S&P 500 rose about 0.1% to 2059 at the close.
-VIX dipped about 1% to 14.57.
-The yield on the 10-year Treasury dropped to 1.76%.

Most indicators are in neutral territory and have flattened suggesting lack of direction.
The slope S&P 500, 200-dMA is still falling; the “Golden Cross” with the 50-dMa crossing above the 200-dMA remains. The Golden Cross is a bullish indication, but it has not generated much enthusiasm since it appeared 10-days ago. The S&P 500 is now 2.3% above its 200-dMA. 
RSI is close oversold, but the Overbought/Oversold Ratio is not.
In summary: indicator bias is neutral.
The short-term Money Trend indicator flat, Monday, a neutral signal.  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.  
The 10-day moving average of the percentage of stocks advancing (NYSE) improved to 51% Monday. It was 49.7% Friday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks dipped to 52.1%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was down and remained negative – a bearish indicator in the short-term.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +177 Monday. (It was +138 Friday).   The 10-day moving average of the change in spread rose to +14. In other words, over the last 10-days, on average; the spread has increased by 14 each day. New-hi/new-low data is flattening out without much direction. Market Internals remained neutral on the markets, but improved overall.

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.
Monday, 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 11-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…