Thursday, June 9, 2016

Jobless Claims … Wholesale Inventories .,. BLS Report Wrong … Bearish Signs for Oil … Bubble in Bonds … Volume Suggests Weakness in Stocks … Stock Market Analysis

First-time jobless claims unexpectedly fell last week and the number of Americans already receiving benefits tumbled to an almost 16-year low, consistent with a healthy labor market. Applications to collect unemployment insurance dropped by 4,000 to 264,000 in the period ended June 4…”

“U.S. wholesale inventories recorded their largest increase in 10 months in April as stocks of machinery and farm products rose, suggesting inventories could be a boost to economic growth in the second quarter.” Story at…
BLS REPORT GOT IT WRONG – MISH SHEDLOCK (Global Economic Trend Analysis)
“The BLS JOLTS (Jobs Openings and Labor Turnover) report came out today. The BLS claims jobs openings are up. Based on an alternate reports, I suggest opening(s) are not only down, but falling steeply.” Story at…
“Crude prices may have hit new highs for the year Wednesday, but oil expert John Kilduff doesn't expect the rally to continue. "There's been a spectacular run, no question about it, but I think we're at a point here where it's going to be hard to continue. A lot of headwinds," the founding partner of Again Capital said in an interview with CNBC's "Power Lunch" on Wednesday.” Story at…
My cmt: Falling oil prices would be bad for the stock market.
“Bill Gross, the manager of the $1.4 billion Janus Global Unconstrained Bond Fund, warned central bank policies that pushed trillions of dollars into bonds with negative interest rates will eventually backfire violently. “Global yields lowest in 500 years of recorded history,” Gross, 72, wrote Thursday on the Janus Capital Group Inc. Twitter site. “$10 trillion of neg. rate bonds. This is a supernova that will explode one day.” Story and video at…
“From this corner’s view, this market is on the verge of falling hard, but people are not seeing it. With the market is so close to all-time highs, most are fixated on it making new highs, rather than paying attention to valuation or macroeconomic conditions, both of which present serious risks…this market is being driven higher by smaller investors. Institutional investors are selling into the rallies.” – Thomas H. Kee,  President and CEO of Stock Traders Daily. Commentary at…
-Thursday, the S&P 500 was down about 0.2% 2115.
-VIX was up about 4% to 14.64 at the close.
-The yield on the 10-year Treasury dropped to 1.68%.
Stocks on the NYSE remain overbought per the tried and true NYSE Overbought/Oversold Ratio (based on advance decline data); and the RSI (14-day, SMA); and Closing Tick, using a 10-dMA of Tick suggested by Tom McLellan. In this analysis, “300” is overbought.
Late-day action on the S&P 500 suggests the Smart Money has been selling.  There has been late-day selling 8-days out of the last 10-days and the 10-dMA late-day gain is below zero on a percentage basis.  That usually predicts a drop in the S&P 500.
Utilities led today; VIX was up 4%; Junk bonds were down; the 10-year bond yield fell; oil was down; tick closed down (indicating selling at the close)…generally weak news for stocks all around. We may see a pullback soon.  Whether it will attract dip buyers or morph into more intense selling remains to be seen.
My short-term Money Trend indicator can be volatile, but it is sharply down as of Thursday, and that’s bearish.  I continue to hold short positions mostly in SH and some in QID in the trading portfolio only. I have been saying that they will have to go if the market exceeds my pain-target of 2110 on the S&P 500. Now that it has, I’ll watch short term action. I hate to sell into overbought conditions.
It’s all about the all-time high of 2131.  The S&P 500 is now 0.7% below the all-time high.
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 59.4% Thursday. It was 62.4% Wednesday. A number above 50% is usually GOOD news for the markets; now, the value is too good suggesting a pullback is overdue.
On a longer term, the 150-day moving average of advancing stocks slipped to 51.9%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) dropped sharply, but remained positive.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +209 Thursday. (It was +268 Wednesday).  The 10-day moving average of the change in spread slipped to +12. In other words, over the last 10-days, on average; the spread has increased by 12 each day. Generally, new-high/new-low data is nearing a high number that suggests a turn to the downside will occur soon; today, Market Internals switched to neutral 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, VIX & Sentiment indicators were neutral.  The Price indicator (measuring the size of up vs down moves) was positive. The long-term NTSM indicator switched to HOLD.  I ignored Buy signals back in April and that was a mistake; still, I’ll wait another day or so before making any moves. The S&P 500 did get above 2110 (my projected buy point), but let’s see if it will hold.  I hate buying into an overbought market, but I am looking at a round-trip – my first sell signal was back at 2063 on the S&P 500 in December 2015 – and I don’t plan to stay out if the market can continue to show strength in Price movement. Steve Grasso, trader and CNBC contributor, recommends waiting for new highs before moving back in and there is wisdom in that advice.

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 can stay 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…