Thursday, June 23, 2016

Jobless Claims … Home sales … Leading Economic Indicators … Chicago FED National Economic Index … Retail Adds Workers? Sort of … Stock market Analysis

“The number of Americans filing for unemployment benefits fell last week to near a 43-year low, suggesting labor market resilience even though hiring slowed sharply in May…Initial claims for state unemployment benefits declined 18,000 to a seasonally adjusted 259,000 for the week ended June 18…”  Story at…
New-home sales declined 6% last month to a seasonally adjusted rate of 551,000 from a downwardly revised 586,000 in April…
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.2 percent in May to 123.7 (2010 = 100), following a 0.6 percent increase in April, and a 0.1 percent increase in March…Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “While the LEI suggests the economy will continue growing at a moderate pace in the near term, volatility in financial markets and a moderating outlook in labor markets could pose downside risks to growth.” Press release available at…
My cmt: Not exactly a ringing endorsement, but not bad either.
“The Chicago Fed’s national activity index fell to –0.51 in May from +0.05 in April; most economists expected an improved reading in May from April. All four broad categories of indicators decreased from April, and all four categories made negative contributions to the index in May.” Story at…
My cmt: The FED states that when the CFNAI-MA3 value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. The 3-monMA is currently -0.36.
In a nut shell, Obamacare is forcing retailers to cut hours to avoid healthcare costs. Obamacare does not require part-time workers to be covered. We now have more workers, but hours-per-worker has fallen; so there has been no hiring in retail during the last 10-months. See analysis at…
-Thursday the S&P 500 was up about 1.3% 2113.
-VIX fell about 19% to 17.25 at the close.
-The yield on the 10-year Treasury rose to 1.74%.
Happy days are here again…Other than employment, there was a dearth of economic good news today, but oil was up 2% and “Brexit” looks like “No-Exit” so markets liked the news overall.
The size of the up-move Thursday was statistically significant and that means that the price-volume exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Friday). There could be some short positions un-wound tomorrow, so another up-day wouldn’t surprise me.
More on Bollinger Bands: While I noted narrow Bollinger Bands yesterday, the more reliable use for Bollinger Bands comes when examining the value of the Index vs. the upper and lower Bollinger Bands.  If the Index is very close to one of the bands or manages to cross above or below a band, a reversal is usually imminent. Thursday, the S&P 500 jumped up to very near the upper Bollinger Band and that should bring a reversal down for the Index, sooner rather than later.
My “calm-before-the-storm” indicator is now quite low.  The last time it hit a value this low was in December 2014 and the S&P 500 dropped 5% in 9-days afterward. In September 2014 the Index was down 7% 6-weeks after these same low levels on the indicator.  It has been lower than the current value so there is a possibility the Index continues to melt up for a while. This is not a good timing indicator since it can warn a month or more ahead of trouble.
Volume was only average today (compared to the month) so for all the exuberance, there was not huge participation
In spite of the bullishness today, I think there is a sell-off coming soon. Whether it will be a 3-5% pullback or something more remains to be seen.
My short-term Money Trend indicator can be volatile; it bounced up suggesting a bullish position.  I continue to hold short positions mostly in SH and some in QID in the trading portfolio only – an obvious mistake in hindsight.
The 10-day moving average of the percentage of stocks advancing (NYSE) jumped to 50.7% Thursday. It was 46.2% Wednesday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks climbed to 52.6%. A value above 50% generally indicates an up-trend, but realistically the trend has been flat for some time.  The McClellan Oscillator (a Breadth measure) rose to +20 (percentage calculation method).
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +196 Thursday. (It was 104 Wednesday.) The 10-day moving average of the change in spread rose to minus-1. In other words, over the last 10-days, on average; the spread has decreased by 1 each day. Market Internals improved to neutral.

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 NTSM system indicated Buy at the 11 Feb bottom; again 2-days after the bottom on high up-volume; and from 22 Feb thru 25 April. I ignored the early signals convinced that it was a bear market bounce; I ignored recent signals due to overbought conditions.  All-in-all, it’s still questionable whether the S&P 500 will make new-highs.
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…