Wednesday, May 18, 2016

FOMC Minutes … Crude Inventories … Big Moves Coming to the Stock Market … Technicians are Bearish … Stock Market Analysis

FOMC MINUTES (Bloomberg)
“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June...” - Minutes of the Federal Open Market Committee’s April 26-27. Story at…
My cmt: This was somewhat of surprise to the markets. With inflation picking, up per yesterday’s news, perhaps a rate hike will occur in June, but it is still “data dependent” so I don’t know if the market has fully digested that concept. The market seems to expect clues from the FED and treats today’s release as a clue. In the FED’s data-dependent world, there may not be clues – only data.
“U.S. crude oil stockpiles rose unexpectedly last week even as gasoline and distillate inventories fell more than expected, data from the Energy Information Administration showed on Wednesday. Crude inventories USOILC=ECI rose 1.3 million barrels in the week to May 13…” Story at…
BIG MOVES COMING (Ciovacco Capital Management)
“When we are in a period of long-term consolidation, it often feels like the market will never break from the range. While anything is possible, history says we should have contingency plans in place for a shocking push higher and an alarming crisis-like plunge.”
My cmt: This analysis is similar to my comments regarding the number of days the S&P 500 has gone without making a new-high. I am bearish based on my analysis of other indicators.  The above commentary is neutral. See my 23 March blog, Paragraph titled, “Bear Market or Bull” at…
"I was recently with a bunch of great technicians in New York and we all got together and, I have got to say, that many of them were bearish and some severely bearish. And they pointed back to…all of 2015 and now early 2016—all that churning—and they look at that as a massive top…and I can't deny that either. I mean especially if we are getting another failed rally here…because I do worry about that massive potential top…" – Ralph Acampora, “one of Wall Street’s most respected technical analysts” Commentray at…
- Wednesday, the S&P 500 finished little changed at 2048 at the close.
-VIX rose about 2% to 15.95.
-The yield on the 10-year Treasury jumped higher to 1.88% on Fed rate fears.
As of 2PM volume on the NYSE was about half normal volume for the past month. Volume picked up after the 2PM Fed announcement (see below) and finished slightly above average for the month. The S&P 500 lost more than 1% after the Fed announcement and only regained about half the loss to finish basically flat for the day.
Indicators are mostly bearish Wednesday, but not drastically so.
The short-term Money Trend indicator is still drifting up, Wednesday, a bullish signal, but I continue to hold short positions mostly in SH and some in QID. 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) declined to 49.9% Wednesday. It was 50.5% Tuesday. A number below 50% is usually BAD news for the markets.
On a longer term, the 150-day moving average of advancing stocks increased to 51.5%. 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 +47 Wednesday. (It was +75 Tuesday).   The 10-day moving average of the change in spread was minus-7. In other words, over the last 10-days, on average; the spread has increased by 7 each day. Market Internals deteriorated, but remained neutral 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.

Wednesday, 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…