Thursday, June 16, 2016

Consumer Price Index (CPI) … Unemployment Claims … Philadelphia FED … Big Four Indicators … Stock Market Analysis

“U.S. consumer prices moderated in May, but sustained increases in housing and healthcare costs kept underlying inflation supported, which could still allow a cautious Federal Reserve to raise interest rates this year…The Labor Department said its Consumer Price Index increased 0.2 percent last month, slowing from April's 0.4 percent gain…” Story at…
The number of Americans filing new applications for jobless benefits rose last week, but remained at a level consistent with employment growth. Initial claims for unemployment benefits, a proxy for layoffs across the U.S., increased by 13,000 to a seasonally adjusted 277,000 in the week ended June 11…” Story at…
“The Philadelphia Fed manufacturing index showed mild improvement in June, only the second positive reading in the past ten months. The index rose to a reading of 4.7 in June from negative 1.8 in May…” Story at…
BIG FOUR INDICATORS (Advisor perspectives)
“There is… a general belief that there are four big indicators that the committee [NBER Business Cycle Dating Committee – think recessions] weighs heavily in their cycle identification process. They are: Nonfarm Employment; Industrial Production;  Real Retail Sales; Real Personal Income (excluding Transfer Receipts).”

Chart and commentary at…
-Thursday the S&P 500 was up about 0.3% 2078.
-VIX was down about 4% to 19.37 at the close.
-The yield on the 10-year Treasury slipped to 1.56%.
The Bond Ghouls remain worried, market internals continue down and closing tick was again very negative at minus -512 so this dip (whatever it is) may continue. Looking at some selected internals, the % of stocks advancing has been falling sharply along with advancing volume.  New-high/new-low data is also bearish.  Over-all, indicators look more bearish than not.
At this point, it looks like around 2040 would be a logical place for a bounce up (this is a moving target as conditions change); the 200-dMA is around 2020 and that is a support level too.
My short-term Money Trend indicator can be volatile, but it’s headed down again, though not steeply; that’s slightly bearish.  I continue to hold short positions mostly in SH and some in QID in the trading portfolio only.
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 48.0% Thursday. It was 49.6% 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 51.8%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was almost unchanged, but it remained solidly in negative territory.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +62 Thursday. (It was +85 Wednesday).  The 10-day moving average of the change in spread dipped to minus-7. In other words, over the last 10-days, on average; the spread has decreased by 7 each day. Market Internals remained negative on the market.

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 & Sentiment indicators were neutral; the Price indicator (measuring the size of up vs down moves) was positive; the VIX indicator remained negative. The long-term NTSM indicator remained 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. I remain in cash earning about 2%.  Short-term bonds would give a similar result.
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…