Thursday, June 30, 2016

Unemployment Claims … Chicago PMI … The Fifteenth of August … FED Manufacturing … Bad time for Stocks … Stock Market Analysis

“More Americans applied for unemployment benefits last week, but the level of jobless claims remains low enough to suggest that most workers enjoy job security. The Labor Department said Thursday that weekly U.S. applications rose by 10,000 to a seasonally adjusted 268,000…” Story at…
CHICAGO PMI (Marketwatch)
“A measure of Chicago-area economic activity surged in June on a big advance in the number of purchasing managers indicating improving production and new orders. MNI Indicators said Thursday the Chicago PMI rose to 56.8, a rise of 7.5 points to move the index comfortably above the 50 mark indicating improving conditions.” Story at…
THE FIFTEENTH OF AUGUST (Real Investment Advice)
“The Fed finds themselves crippled under an imprudent zero interest rate policy and unable to raise interest rates due fear of stoking another crisis.  Worse, other central banks, in a similar quest to keep prior debt serviceable and generate even more debt induced economic growth, have pushed beyond the realm of reality into negative interest rates. In fact, an astonishing $10 trillion worth of sovereign bonds now trade with a negative yield….There is nothing normal about any of this. It therefore goes without saying, but we will say it anyway – investment strategies based on historic norms should be carefully reconsidered.” Commentary at…

Chart and commentary from Doug Short at…
“…Let’s say you have $10 and you’re offered either $9 in exchange for it (a sure bet) or you can choose to gamble (I mean invest) it with a 50% chance of receiving $12 and a 50% chance of receiving $5. Which would you choose?
-Assuming this is a repeatable game, your calculation should go something like this:
(50% x $12) + (50% x $5) = an expected value of $8.50
What this means is that played over and over again, the value of this “investment” will yield $8.50. Since $9 is more than $8.50, you choose to take the guaranteed loss of $1 and you live to play another day.
-Globally, investors are making this same exact calculation except on a MUCH bigger scale.” Commentary at…
That says it all. See commentary and video at…
My cmt: Interesting commentary/video.
-Thursday the S&P 500 was up about 1.4% to 2099.
-VIX dropped about 6% to 15.63. (The Options Boys are over Brexit!)
-The yield on the 10-year Treasury rose slightly to 1.49%.
This morning volume was low on the NYSE aqnd my short-term Money Trend indicator was down even though the Index was up about 0.5%.  Volume picked up, Money Trend improved and the S&P 500 moved dramatically to the upside later in the day. Whether the markets liked the British Central Bank’s announcement that they will likely lower rates; or perhaps it was just month end buying and rebalancing; either way the day finished strongly.  The end of the month and first several days of a new month are typically strong days. 
The S&P 500 remains “overbought” when using the Overbought/Oversold Ratio, a measure of the advance decline line. Bollinger Bands and RSI have cleared their oversold readings from 3-days ago. 
The Bond market remains priced for continuing troubles, but this could be a false signal. It may be that yields are low due to the rest of the world buying our bonds pushing up prices. (As bond prices rise, yield goes down.)
I had expected that the Brexit shock would have some after-shocks.  It still seems almost impossible that Brexit has been shrugged off and the market is now undergoing a buying frenzy.
I said yesterday, “The upward bounce may be over, that’s my guess; I think we go down from here, but who knows!” The Index went up over 1%. Please Mr. Market, give me a break; I can’t eat any more Humble Pie!!!
My short-term Money Trend indicator can be volatile; it remains up Thursday, a bullish position.  I continue to hold short positions mostly in SH and some in QID in the trading portfolio only.
The 10-day moving average of the percentage of stocks advancing (NYSE) jumped up to 60.3% Thursday and is now “overbought” using the old overbought/oversold ratio. It was 57.3% Wednesday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks was up to 52.5%. 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) jumped from +20 (percentage calculation method) to +53.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +379 Thursday. (It was +289 Wednesday.) The 10-day moving average of the change in spread rose to +32. In other words, over the last 10-days, on average; the spread has increased by 32 each day. Market Internals remained positive along with most of my Indicators.

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). 
Thursday, the Sentiment, Price and VIX indicators were neutral. Volume (a variant of on-balance volume {OBV}) was negative. The long-term 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%. 
The NTSM system indicated Buy at the 11 Feb bottom; and 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 more recent signals due to overbought conditions.  All-in-all, it’s still questionable whether the S&P 500 will make new-highs and now we must wonder whether the correction low of 1829 will be tested.
The S&P 500 peaked in Mid-May 2015 and has not been able to break higher in the past 13-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…