Friday, June 10, 2016

Michigan Consumer Sentiment … Oil … Yield Curve Flattening … This Stock Market is Confusing the Pros … Stock Market Analysis

“Confidence among American consumers in June eased from an almost one-year high as favorable views about personal finances were offset by concerns about the economy’s prospects, a University of Michigan survey showed on Friday. Preliminary June index fell to 94.3 from 94.7 in May…” Story at…
For every bearish oil call published, I saw 2-more that called for higher oil. Who knows?
“Rarely have investors been so willing to loan money to the U.S. government and get so little in return. With worries about global growth festering, and uncertainty about the coming referendum on the U.K.’s membership in the European Union further clouding the picture, the yield on the 10-year Treasury slipped to around 1.68% on Thursday. The last time it was so low was February, when markets around the world were in panic mode.” Story at…
My cmt: Sort of suggests that we may see some more panic.  Yields around the world are low, so buying US debt may look good, especially if the FED isn’t raising rates. 
“The picture remains murky when it comes to U.S. equities, and market observers aren’t sure what to make of current conditions, noted Louise Yamada [Louise Yamada Technical Research Advisors] on Saturday….She proposes three scenarios likely to emerge: a 40 percent chance of a trading range forming, a 40 percent chance for a breakout to new highs, and a 20 percent chance for a resumption of the bear market…“I think the investors today may have to get used to facing more of a trading market, and less of a trending market,” she said. “If you’re not a good trader, I would suggest perhaps you don’t play it.” Commentary at…
-Friday, the S&P 500 was down about 0.9% 2096.
-VIX was up about 16% to 17.03 at the close.
-The yield on the 10-year Treasury dropped to 1.64%.
Both the Options Boys and the Bond Ghouls are worried.
Stocks on the NYSE remain overbought per the tried and true NYSE Overbought/Oversold Ratio (based on advance decline data); but RSI (14-day, SMA) and Closing Tick, using a 10-dMA of Tick suggested by Tom McLellan, have cleared their overbought values. It’s not unusual to clear overbought conditions quickly and it really doesn’t say much about the future. The Index already made solid overbought indications and that usually means some downward action is expected.
The size of the down-move Friday was statistically significant and that means that the price-volume move exceeded my statistical parameters and, in about 60% of the time, that leads to an up-day the next day (Monday). I wouldn’t bet that will be the case this time since fear seems to be escalating in Europe on Brexit and that may continue to carry over to the US.
Late-day action on the S&P 500 continues to suggest the Smart Money has been selling, but there was late day buying today. That was tempered by closing Tick (measuring the last trades of the day) that was a very low minus-525.
All in all, I think the selling will generally continue next week with a target of 2015-2030; then we’ll see.
My short-term Money Trend indicator can be volatile, but it is sharply down again Friday, 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 closely.
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 56.2% Friday. It was 59.4% Thursday. A number above 50% is usually GOOD news for the markets, but now it is falling rapidly.
On a longer term, the 150-day moving average of advancing stocks slipped to 51.8%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) dropped sharply, and switched to negative.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +126 Friday. (It was +209 Thursday).  The 10-day moving average of the change in spread slipped to +5. In other words, over the last 10-days, on average; the spread has increased by 5 each day. Market Internals remained 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.
Friday, the Volume, VIX & Sentiment indicators were neutral, but that may change soon if this downturn continues.  The Price indicator (measuring the size of up vs down moves) was positive. The long-term NTSM indicator remained HOLD.  (If you do have an itch to get back in, 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…