Saturday, July 30, 2016

Stock Market Analysis

MARKET REPORT / ANALYSIS        
-Friday the S&P 500 rose about 0.2% to 2173. (…again, near highs around 2075.)
-VIX dipped about 1% to 11.87.
-The yield on the 10-year Treasury dropped to 1.46%.
 
Friday, it looked like last-day-of-the-month action when mandatory retirement inflows occur. This usually carries thru for several days into the new month too, so expect a few up-days early next week. Also, there may have been some Index rebalancing going on.
 
This is for anyone who followed my trades and is underwater on short positions. There may an opportunity developing to trade VIX. There isn’t a way to trade VIX directly since it is based on a wide range of S&P 500 index options including both puts and calls.  The easiest way to trade VIX is thru the VXX ETF. 
 
Currently my statistical analysis of the movement in Price-Volume shows that a big move may be coming for the S&P 500 and the direction is most likely down. If the set up actually develops (it isn’t there yet), one could buy VXX the day after my calm-before-the-storm indicator flashes red and sell the position on the day that a large statistical move occurs in Price-Volume. That sounds very loose so here are the results from this strategy over the past 2-years:
17 June 2016 BUY VXX / 23 June SELL VXX: Gain 8%
9 June 2016 BUY VXX / 29 June 2016 SELL VXX: Gain 5.5%
23 Apr 2015 BUY VXX / 7 May 2015 SELL VXX: Gain 3.9%
26 Nov 2014 BUY VXX / 10 Dec 2014 SELL VXX: Gain 13.6%
29 AUG 2014 BUY VXX / 25 Sep 2014 SELL VXX: Gain 7.9%
There were no losses and only 1-false call; the 3.9% gain in Apr 2015 did not include a large move indicating a sell.  (Without a sell signal, the position must be sold in 5-days by rule.) With VIX now below 12 it would appear to be an opportunity for a significant gain; still, there are no guarantees. 
 
Now back to the regularly scheduled program…
Market Internals on the NYSE continue to fall faster that the S&P 500 and this usually indicates a pullback is coming. 
 
My 10-day sum of 16 indicators dropped from -16 to -18 Friday, so indicators continue to deteriorate.  
 
I’m still guessing we see a pullback in the 4-5% range, but since Breadth (10-dMA of Advancing stocks) moved up Friday my confidence level dropped some.
 
A huge up-day would be a signal for a short-term top. I remain Bullish in the intermediate term; bearish short-term. A retracement down is overdue.
 
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; Friday it remains pointing down; a bearish indication, but not as strongly as it has been. 
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 54.1% Friday. It was 53.2% Thursday. A number above 50% is usually GOOD news for the markets, but this number peaked about 2-weeks ago showing deterioration in the markets.
 
On a longer term, the 150-day moving average of advancing stocks dipped to 53.6%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) rose from -12 (percentage calculation method) to -3.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +277 Friday. (It was +202 Thursday.) The 10-day moving average of the change in spread rose to +10. In other words, over the last 10-days, on average; the spread has increased by 10 each day. If there is going to be a pullback, new-high, new-low data needs to go negative on the spread. The spread is not there yet, but new-hi/new-low data is rolling over and this usually precedes a downturn.. Market Internals remain 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). 
 
LONG TERM INDICATOR
Friday, the Price indicator was positive; Sentiment, Volume and VIX indicators were neutral. The long-term indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks.  I expect to add more stocks should we get the anticipated pullback.
 
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.  I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.

Friday, July 29, 2016

Jobless Claims … GDP-Adv … Chicago PMI … Michigan Sentiment …

I’ll post analysis later; as of 3PM or so there's not much change from prior Blog posts.  For now, here’s the news…
 
JOBLESS CLAIMS (Washington Post)
“The number of Americans who filed for unemployment benefits last week rose from a three-month low, consistent with the Federal Reserve’s view of a stronger job market. Jobless claims increased by 14,000 to 266,000 in the week ended July 23…” Story at…
https://www.washingtonpost.com/business/economy/weekly-jobless-claims-increase-in-week-ended-july-23/2016/07/28/0a7c7c84-54c3-11e6-88eb-7dda4e2f2aec_story.html
 
GDP-ADV (Bloomberg)
“The U.S. economy expanded less than forecast in the second quarter after a weaker start to the year than previously estimated as companies slimmed down inventories and remained wary of investing amid shaky global demand. Gross domestic product rose at a 1.2 percent annualized rate after a 0.8 percent advance the prior quarter…” Story at…
http://www.bloomberg.com/news/articles/2016-07-29/u-s-economy-grew-a-less-than-forecast-1-2-in-second-quarter
 
CHICAGO PMI (MarketWatch)
“A measure of Chicago-area economic activity retreated only slightly in July after a strong gain in the prior month. The Chicago PMI fell 1 point to 55.8…” Story at…
http://www.marketwatch.com/story/chicago-pmi-stays-at-high-level-in-july-2016-07-29
 
MICHIGAN SENTIMENT (CNBC)
“A measure of consumers' attitudes was slightly lower this month. The Index of Consumer Sentiment hit 90 in July, the University of Michigan said Friday.” Story at…
http://www.cnbc.com/2016/07/29/consumer-sentiment-for-july-2016-final-reported-by-the-university-of-michigan.html
 
EARNINGS (FACTSET)
- “With 63% of the companies in the S&P 500 reporting earnings to date for Q2 2016, 71% have reported earnings above the mean estimate and 57% have reported sales above the mean estimate...
- Earnings Growth: For Q2 2016, the blended earnings decline is -3.8%..
- Earnings Guidance: For Q3 2016, 36 companies have issued negative EPS guidance and 20 companies have issued positive EPS guidance…”
The above excerpted from Earnings Insight for 29 July 2016 from FACTSET.

Thursday, July 28, 2016

Jobless Claims … Odd Man Out … Red Flags … Stock Market Analysis

JOBLESS CLAIMS (Bloomberg)
“The number of Americans who filed for unemployment benefits last week rose from a three-month low, consistent with the Federal Reserve’s view of a stronger job market. Jobless claims increased by 14,000 to 266,000 in the week ended July 23…” Story at…
http://www.bloomberg.com/news/articles/2016-07-28/jobless-claims-in-u-s-climbed-last-week-from-a-three-month-low
 
ODD MAN OUT (Global Economic Perspective)
“Spot the Odd One: Gold Up, Silver Up, Oil Down, Dollar Down, Treasuries Up, Economy Strengthening…” Commentary at…
https://mishtalk.com/2016/07/27/spot-the-odd-one-gold-up-silver-up-oil-down-dollar-down-treasuries-up-fed-says-economy-strengthening/
My cmt: It’s obvious right? If the economy is strengthening, the others shouldn’t be rising too.
 
RED FLAGS (Real Investment Advice)
“…the market is currently 3-standard deviations above its 50-day moving average. This is ‘rarefied air’ in terms of price extensions and a pullback is now necessary to provide a better entry point for increasing equity allocations.” Commentary at…
https://realinvestmentadvice.com/technically-speaking-red-flag-update/
 
MARKET REPORT / ANALYSIS        
-Thursday the S&P 500 rose about 0.2% to 2170.
-VIX dipped about 1% to 12.72.
-The yield on the 10-year Treasury remained 1.51%.
 
Now that the S&P 500 has passed its old high of 2131, made last May of 2013, one would think there is an all clear signal for the markets - unfortunately, not yet. Traders generally like to see the Index close 2-times above a trend line to show a change in trend …or… close more than 3% above the trend. When it comes to breaking to new highs in a convincing manner, I think it needs to do both. The Index is now 2% above the prior high and drifting around the 2175 all-time high for a little more than a week. I mention this to point out that this rally still could be just a bear market bounce.  Market action recently isn’t as bullish as it should be to convince me that new-highs are coming.
 
Market Internals on the NYSE continue to fall faster that the S&P 500 and this usually indicates a pullback is coming. 
 
My 10-day sum of 16 indicators dropped from -11 to -16 Thursday, so deterioration continues in more indicators.
 
I’m still guessing we see a pullback in the 4-5% range and clues are beginning to give more confidence in the forecast. A huge up-day would be a signal for a short-term top. I remain Bullish in the intermediate term; bearish short-term. A retracement down is due now.
 
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; Thursday it remains pointing down and continues to be sharply down; a bearish indication.  (Shorts are tattered, but still on.)
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 53.2% Thursday. It was 53.7% Wednesday. A number above 50% is usually GOOD news for the markets, but this number peaked about 2-weeks ago showing a deterioration in the markets.
 
On a longer term, the 150-day moving average of advancing stocks dipped to 53.7%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) dipped from -9 (percentage calculation method) to -12.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +202 Thursday. (It was +158 Wednesday.) The 10-day moving average of the change in spread slipped to minus-3. In other words, over the last 10-days, on average; the spread has decreased by 3 each day. If there is going to be a pullback, new-high, new-low data needs to go negative on the spread. The NYSE is not there yet. Market Internals remain 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). 
 
LONG TERM INDICATOR
Thursday, the Price indicator was positive; Sentiment, Volume and VIX indicators were neutral. The long-term indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks.  I expect to add more stocks should we get the anticipated pullback.
 
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.  I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.

Wednesday, July 27, 2016

Durable Goods Orders … Crude Inventories … FOMC Rate Decision … Stock Market Analysis

DURABLE GOODS ORDERS (MarketWatch)
“Orders for durable or long-lasting goods made in the U.S. sank 4% in June, marking the biggest drop in almost two years and reflecting ongoing struggles by American manufacturers to drum up sales and help boost the U.S. economy.” Story at…
http://www.marketwatch.com/story/us-durable-goods-orders-sink-4-in-june-biggest-drop-in-almost-two-years-2016-07-27
My cmt: In spite of some recent improved economic news, it seems that manufacturing remains in the toilet.
 
CRUDE INVENTORIES (24/7 WallSt)
“The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 1.7 million barrels last week…The commercial crude inventory remains at historically high levels for this time of year, according to the EIA.” Story at…
http://247wallst.com/energy-economy/2016/07/27/crude-oil-price-plunges-on-surprise-inventory-growth/
 
FOMC RATE DECISION (Bloomberg)
“The Federal Reserve left interest rates unchanged while saying risks to the U.S. economy have subsided and the labor market is getting tighter, suggesting conditions are getting more favorable for an increase in borrowing costs.” Story at…
http://www.bloomberg.com/news/articles/2016-07-27/fed-says-risks-have-diminished-as-it-leaves-main-rate-unchanged
 
MARKET REPORT / ANALYSIS        
- Wednesday the S&P 500 dipped about 0.1% to 2167.
-VIX dipped about 2% to 12.85. (The Options Boys seem to have gotten over worries.)
-The yield on the 10-year Treasury dropped to 1.51%. (The Bond Ghouls are worried.)
 
Volume picked up today and was about 15% above the monthly average. It hasn’t been above average since the end of June. It was average yesterday and that too was nearly a 15% jump above the prior week’s numbers.  I am always cautious to declare it was distribution (smart money selling to weak hands) because I have seen analysis that suggested high volume with little change in price validates the price.  Both arguments seem reasonable to me.  Let’s just say that higher volume on down days suggests to me that some pullback is underway, given the other clues previously noted and repeated below. We’ll see; perhaps Facebook earnings will save the day. Futures are up again as I am writing.
 
Wednesday’s value of RSI was 80, indicating “overbought” for the S&P 500 as it has for 6 of the last 8-days. The Index is no longer “overbought” when using the old stand-by Advance-Decline Ratio, but it continues to decline giving a warning for the future. I watch late-day action since that’s when the Pros trade – the so called “smart money.”  That indicator reached “overbought” numbers yesterday. It is a rare signal that has been right most of the time – except for last March.
 
Market Internals on the NYSE continue to fall faster that the S&P 500 and this usually indicates a pullback is coming. 
 
My 10-day sum of 16 indicators dropped from -1 to -11, so deterioration is showing up in more indicators.
 
I’m still guessing we see a pullback in the 4-5% range and clues are beginning to give more confidence in the forecast. I remain Bullish in the intermediate term; bearish short-term. A retracement down is due now.
 
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; Wednesday it remains pointing down and is now more sharply down; a bearish indication. 
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 53.7% Wednesday. It was 53.8% Tuesday. A number above 50% is usually GOOD news for the markets, but this number peaked about 2-weeks ago showing a deterioration in the markets.
 
On a longer term, the 150-day moving average of advancing stocks dipped to 53.9%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) dipped from +1 (percentage calculation method) to -9.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) dropped to +158 Wednesday. (It was +212 Tuesday.) The 10-day moving average of the change in spread rose to minus-2. In other words, over the last 10-days, on average; the spread has decreased by 2 each day. If there is going to be a pullback, new-high, new-low data needs to go negative on the spread. The NYSE is not there yet. Market Internals remain 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). 
 
LONG TERM INDICATOR
Wednesday, the Price indicator was positive; Sentiment, Volume and VIX indicators were neutral. The long-term indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks.  I expect to add more stocks should we get the anticipated pullback.
 
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.  I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.

Tuesday, July 26, 2016

Stock Market Analysis

MARKET REPORT / ANALYSIS        
-Tuesday the S&P 500 unchanged at 2169.
-VIX rose about 1% to 13.05. (The Options Boys may be a bit concerned.)
-The yield on the 10-year Treasury dipped to 1.57%.
 
Tuesday’s value of RSI was 81, indicating “overbought” for the S&P 500 as it has for 5 of the last 7-days. The Index is no longer “overbought” when using the old stand-by Advance-Decline Ratio, but the A/D Ratio continues to decline giving a warning for the future.
 
Market Internals on the NYSE continue to fall faster that the S&P 500 and this usually indicates a pullback is coming. 
 
My 10-day sum of 16 indicators dropped from +11 to -1, so deterioration is showing up in more indicators.
 
Tuesday’s beat for Apple is a good news item for the bulls, but the miss for McDonalds was a surprise to the downside. (MCD lost more than 4% on the day.) Futures are up as I write this, but technicals continue to say down.
 
I’m still guessing we see a pullback in the 4-5% range. I remain Bullish in the intermediate term; bearish short-term. A retracement down is due now.
 
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; Tuesday it remains pointing down; a bearish indication.  [I am going to revamp short-term indicators and begin some more serious short-term trading to make back losses on my overzealous short trade, now down more than 10%.]
 
I’ll cover the short position I added last week unless the S&P 500 falls or opens really big Wednesday.  A huge open would indicate a 1% up day and that too would be bearish.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 53.8% Tuesday. It was 54.7% Monday. A number above 50% is usually GOOD news for the markets, but this number peaked about 2-weeks ago showing a deterioration in the markets.
 
On a longer term, the 150-day moving average of advancing stocks climbed to 54%. A value above 50% generally indicates an up-trend.  The McClellan Oscillator (a Breadth measure) rose from -4 (percentage calculation method) to +1; essentially unchanged.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +212 Tuesday. (It was +166 Monday.) The 10-day moving average of the change in spread rose to minus-5. In other words, over the last 10-days, on average; the spread has decreased by 5 each day. Market Internals remain 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). 
 
LONG TERM INDICATOR
Tuesday, the Price indicator was positive; Sentiment, Volume and VIX indicators were neutral. The long-term indicator is HOLD.


MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks.  I expect to add more stocks should we get the anticipated pullback.
 
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.  I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.