Tuesday, May 10, 2016

JOLTS – Job Openings … GDPNow … T-Bonds Repeat 2015? … Stock Market Analysis

JOLTS (Reuters)
“U.S. job openings increased in March and employers appeared to have trouble filling openings, indicating the labor market remains fairly robust despite April's slowdown in employment gains. Job openings, a measure of labor demand, increased 149,000 to a seasonally adjusted 5.8 million…” Story at…
GDPNow (Atlanta Federal Reserve)
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.2 percent on May 10, up from 1.7 percent on May 4. Since the previous GDPNow update on May 4, the forecast for second-quarter real consumer spending growth increased from 2.6 percent to 3.0 percent and the forecast for second-quarter real fixed investment growth increased from 0.4 percent to 2.2 percent.”
T-BONDS REPEATING PATTERN OF A YEAR AGO (McClellan Financial Publications) 

Chart and commentary at…
Falling T-bond prices would normally suggest upside for the stock market, but that wasn’t the case in 2015.  Will this time be different? Only time will tell. Tom McClellan had been predicting trouble for stocks this spring, but I think he is more sanguine now. 
-Tuesday, the S&P 500 rose about 1.3% to 2084 at the close.
-VIX dipped about 6% to around 13.6.
-The yield on the 10-year Treasury was unchanged at 1.76%.
I had expected that I might see a big move down followed by another try at new highs in the S&P 500 today.  Instead, Tuesday we had a big move up. The size of the up-move Tuesday was statistically significant and that means that the price-volume move UP exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Wednesday). Given that the up-day occurred in the vicinity of highs (going back to November), I give it more credence that the future is more likely to be down (at least in the short-term).  There were cross currents on the move though - late-day buying suggests the Pros think the market is going higher.
The short-term Money Trend indicator is mixed, but mostly trending up, Tuesday, and that’s a mildly bullish to 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) remained 51% Tuesday. It was 51% Monday. 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%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) improved, but remained negative – a bearish indicator in the short-term.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +230 Tuesday. (It was +177 Monday).   The 10-day moving average of the change in spread rose to +16. In other words, over the last 10-days, on average; the spread has increased by 16 each day. New-hi/new-low data is flattening out without much direction. Market Internals remained neutral on the markets. I am a little surprised they didn’t switch to positive.

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