Wednesday, June 8, 2016

JOLTS – Job Openings … Crude Inventories … Q2 Projected Earnings … Massive Gains Ahead? … Stocks above their 200-day Moving Average … Stock Market Analysis

JOLTS (Reuters)
“The pace of hiring by U.S. employers slowed to near a two-year low in April, pushing up job openings in a potential sign that firms are having a hard time finding workers.” Story at…
“Oil prices gave up some gains after government data showed weekly U.S. crude production rose for the first time in three months and fuel stockpiles jumped unexpectedly.” Story at…
Factset reported that earnings are expected to decline 4.8% year-over-year for the second quarter of 2016 ending June 30. As they noted, this would be the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009. We are reminded that Q1-2016 earnings were down nearly 7%.
Looking at the question of stocks making no new-highs in 52-weeks…again…The following was included in a technical analysis piece I previously discussed:
“Krinsky noted on CNBC on Thursday that the 52-week high for the S&P 500 around 2,128 was reached on July 20, 2015. In the history of the S&P, dating back to 1928, there have been 20 times that the index has gone at least a year without reaching a 52-week high, but once stocks break above that high they have recorded “massive gains,” in 19 out of those 20 instances for a median average gain of 20% in the following year, Krinsky said.” Story at…
My cmt: Initially, I doubted this analysis, but I’ve gone back a few more years and it appears that there were a lot more instances when the S&P 500 went more than a year without making a new high than I suspected.  The current market has gone 263-trading days without a new-high and that’s a couple of days more than a year.  Using 263-days as the time frame (based on the number of trading days since the last all-time high), and examining the last 30-years, the Index has gone a year without making a new-high only 3-times. Those periods started in years 2007, 2000 and 1987. Note they were all crash years.
During the previous 10-yr period, from 1986 to 1976, the Index also went 3-times without a new-high in years: 1983, 1980 and 1976. Gains did tend to be significant in the year following a stagnant one. It is probably worth noting that the 1976 to 1986 period was within the major bear market that started in 1966 and ended in 1982.
Let’s look at the second part of the claim. The analyst, Krinsky, said that when the old high was breached higher after a year or more of stalled market action, the S&P 500 was 20% higher a year later (based on the median) 19 out of 20-times.  Let’s look at the most recent instance, 2007. The market made a new high in Oct 2007 that was not breached higher within a year, so it seems to meet the test.  After a new-high was achieved the market was 18% higher a year later.  OK, but it ignores the fact that the S&P 500 didn’t make a new high for more than 5-years and in the interim it experienced an extreme bear-market.  I guess Mr. Krinsky is making a distinction between a 52-week high and all-time highs.  My analysis is based on all-time highs, but the difference seems slim to me.
I think I am missing the point. To me, a year-long stalled market is a cause for concern.  If it breaks out of the malaise, perhaps we may celebrate; and I guess that was the point.
At the old high on the S&P 500 about 58% of stocks were above their 200-dMA.  Now there are about 60% of stocks above their 200-dMA and the Index hasn’t yet breached the previous high of 2131. It’s not a huge difference, but it may indicate that the Index will get above 2131.

Chart from…
-Wednesday, the S&P 500 was up about 0.3% 2119.
-VIX was up about 0.2% to 14.08 at the close.
-The yield on the 10-year Treasury remained 1.71%.
Stocks on the NYSE remain significantly overbought per the tried and true NYSE Overbought/Oversold Ratio (based on advance decline data); RSI (14-day, SMA) is now overbought at 82 and both are bearish indications. Closing Tick is overbought at 372 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 7 out of the last 10-days and the 10-dMA is below zero on a percentage basis.  That usually predicts a drop in the S&P 500.
My short-term Money Trend indicator can be volatile and it is trending down as of Wednesday, 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 wait a day or so more just to 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 0.6% below the all-time high.
8.9% of issues on the NYSE made new-highs Wednesday. At the all-time high last May, only 2.3% of issues made new-highs. Of the 16-major tops going back to 1929, 3 were higher than the current 8.9% value; so we may not be out of the woods yet, but it is good to see this improvement. The average percentage of new-highs at a new-high in the index is 5.8% going back to 1929.
If we do manage to break significantly above 2131, it would appear the market can make gains going forward. Oil is up; high yield is up.
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 62.4% Wednesday. It was 63.5% Tuesday. 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 52.1%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) was up and remained positive.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was a high +268 Wednesday. (It was +205 Tuesday).  The 10-day moving average of the change in spread slipped to +19. In other words, over the last 10-days, on average; the spread has increased by 9 each day. Generally, new-high/new-low data is nearing a high number that suggests a turn to the downside will occur soon; however for now, Market Internals remained positive 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.
Wednesday, 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. The S&P 500 did get to 2110, 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…