-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) ALLOCATIONOn 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.
