“Housing starts dipped in May but held near recent highs, a sign residential construction may have settled into a groove after post-recession fits and starts. Starts fell 0.3% to a seasonally adjusted annual pace of 1.16 million…” Story at….
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.3% 2071.
-VIX dipped about 0.5% to 19.46 at the close.
-The yield on the 10-year Treasury bounced up to 1.62%.
One of the more unusual items I track measures daily moves in price-volume and converts the data into a measure of standard deviation (SD) on a daily basis. When deviations in daily moves get small, I usually refer to it as the calm before the storm, i.e., if SD is low, statistics on the S&P 500 suggests a top now or within the next couple of weeks. The market has been uniform over the last month and this suggests a top now!? Considering the angst the market has been undergoing recently, I am surprised. The last time there was a calm-before-the-storm warning, the market fell 11%. One caution: this indicator is too loose to use for stock market timing since a drop could start now or in a month, or not at all – no indicator is perfect. Another surprise – while it seems that the market has been falling a lot recently, over the past month, half the days have been up and half down. There does not seem to be a future up or down bias based on price action over the past month.
All in all, it appears that the S&P 500 can drop further, but not too much further, before an oversold reading is triggered.
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; it’s headed down, 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.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 48.6% Friday. It was 48.0% Thursday. A number below 50% is usually BAD news for the markets.
On a longer term, the 150-day moving average of advancing stocks rose to 52%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) improved to -28 (percentage calculation method), but it remained solidly in negative territory.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +102 Friday. (It was +62 Thursday.). The 10-day moving average of the change in spread dipped to minus-13. In other words, over the last 10-days, on average; the spread has decreased by 13 each day. Market Internals slipped to Neutral on the market; advancing volume is now headed up on a smoothed 10-day basis.
Friday, 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…