Thursday, May 26, 2016

Unemployment Jobless Claims … Durable Goods Orders … ATA Truck Tonnage … Gunlach on the Market … Stock Market Analysis

“Jobless claims fell for a second week, indicating the surge at the start of May reflected temporary dismissals. Initial applications for unemployment benefits dropped by 10,000 to 268,000 in the week ended May 21…” Story at…

"Orders for long-lasting U.S. manufactured goods surged in April on strong demand for transportation equipment and a range of other products, but continued weakness in business spending plans suggested the manufacturing rout was far from over…durable goods, items ranging from toasters to aircraft meant to last three years or more, jumped 3.4 percent last month…” Story at…
“American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 2.1% in April, following a 4.4% drop during March…Compared with April 2015, the SA index was up 2%...Year-to-date, compared with the same period in 2015, tonnage was up 3.5% on February’s strength. Excluding February, the index was up just 1.8% over the same months in 2015.” Press release at…
My cmt: The important comparisons are year-over-year and those were up. Trucking does not agree with the Cass freight index (it was down) that I mentioned here… 

“Jeffrey Gundlach, founder of DoubleLine Capital, doesn’t have a lot of faith in the recent two-day surge for equities…
‘The market has been going sideways for 18 months, and when it breaks, either up or down, it should be a large move. So let the market prove itself. If it breaks to the upside, which I define as accelerating above 2,200, it is a good, low-risk, ‘go with’ buy.’” – Jeffery Gunlach.  Story at…
-Thursday, the S&P 500 finished basically unchanged at 2090.
-VIX dropped about 3% to 13.43.
-The yield on the 10-year Treasury dropped to 1.82%.
The 5-10-20 Timer issued a BUY signal yesterday.  That is a simple system based on the 5-dEMA and the 10-dEMA higher than the 20-dEMA.
Indicators are mostly bullish and trending generally higher, but the new-high, new-low data is not yet confirming an upswing. The chart is the main issue now. Everyone is watching price action.  Simply put, the S&P 500 needs to break out higher to convince the bears that this is a bull market. 
The short-term Money Trend indicator remains in an uptrend, Thursday, and that’s clearly a bullish signal.  In spite of that, 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) climbed to 53.5% Thursday. It was 53.1% Wednesday. 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 51.7%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) slipped some but remained positive – a bullish indicator in the short-term.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +74 Thursday. (It was +93 Wednesday).  
The 10-day moving average of the change in spread remained minus-2. In other words, over the last 10-days, on average; the spread has decreased by 2 each day. Market Internals remained neutral on the markets, but they are nearly bullish.

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 indicators were 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…