Thursday, May 12, 2016

Jobless Claims … Stock Market Analysis

“The number of Americans filing for unemployment benefits rose last week to a more than one-year high, but economists blamed striking telecommunications workers for the surge and said the data did not signal a deterioration in the overall labor market.” Story at…
- Thursday, the S&P 500 was unchanged at 2064 at the close.
-VIX dipped about 2% to 14.41.
-The yield on the 10-year Treasury rose to 1.76%.
Market Internals remain in negative territory suggesting further downside ahead. Even though the S&P 500 finished flat Thursday, there were negative signs.  Only 37% of volume was advancing volume and less than half of issues advanced on the day. Advancing volume continues to decline and that is generally a bearish sign.
The short-term Money Trend indicator is mixed, Thursday, and it’s 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) rose to 49% Thursday. It was 47.6% Wednesday. A number below 50% is usually BAD news for the markets.
On a longer term, the 150-day moving average of advancing stocks dipped to 51.7%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) declined and remained negative – a bearish indicator in the short-term.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +95 Thursday. (It was +113 Wednesday).   The 10-day moving average of the change in spread fell to minus-2. In other words, over the last 10-days, on average; the spread has declined by 2 each day. Market Internals remained negative 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, 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…