“Consumers in August showed the most confidence in the economy in almost a year, buoyed by improved job prospects, a survey showed. The consumer confidence index rose to 101.1 in August from a revised 96.7 in July….” Story at…
http://www.marketwatch.com/story/consumer-confidence-highest-in-nearly-a-year-2016-08-30
THE SHORT VOLATILITY TRADE – OUT OF HAND (Jesse Felder Tumblr)
Reviewing events of 2015…
“The bi-polar behavior in spot-VIX over the last year empirically supports the theory that a structural weakness now exists in this market by crowding of short volatility players. The shot across the bow for the short volatility complex came during the August 24th correction [2015] when SPX futures opened limit down and the CBOE struggled for 30 minutes to calculate the VIX. By the time the VIX level was finally calculated it opened 25 points higher at 53.29, before falling to 28 intra-day, then rebounding to 40.74 by the close, with the S&P 500 index down -3.9%. At the time of the crash [Aug 2015], the assets in long VIX ETPs outnumbered shorts on a two to one basis…” – Chris Cole.
“Since Cole wrote this the trade has only become more
crowded…the recent surge in VXX short selling…[has taken]…short interest to new
record highs.” - Jesse Felder. Commentary and charts at…
http://jessefelder.tumblr.com/post/149510262010/the-short-vol-trade-has-gotten-completely-out-ofSTOCK BUYBACKS FALL ( Financial Sense)
“…Trim Tabs Investment Research indicates that corporate buybacks have suddenly plunged….Share buybacks always rise during equity bull markets…When repurchases fall sharply, stock prices, in general, are more likely to fall as well."
http://www.financialsense.com/contributors/kurt-kallaus/buybacks-tank-stocks-follow
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was down about 0.2% to 2176.
-VIX rose about 1% to 13.07 near the close.
-The yield on the 10-year Treasury remained 1.57%.
There are a number of Bear indications:
Statistical analysis of the price-volume moves in the S&P 500 suggests a downturn (my calm-before-the-storm indicator, similar to Bollinger Bands); Bollinger Bands are very tight forewarning of a big move coming (most likely down per other indicators); Short-interest in VXX is very high, twice long-interest, and that is bearish; stock buybacks have fallen sharply suggesting trouble for the markets if they don’t more than double the year-to-date number in the 4th quarter of 2016; Oil prices continue to be shaky and many are predicting another leg down; Market Internals have been trending down, but not particularly fast. The market is waiting. When it decides, I think the short-term direction will be down. We’ll see…
My bearish short-term stance remains and I suspect this week will be down again. So far I am 2 for 3 on my weekly guesses.
VXX TRADE:
Tuesday, the calm-before-the-storm indicator (low standard of deviation in recent market moves) still remains down and that suggests that VXX remained a buy as of Monday’s close. While this has been going on for several weeks, it is not unusual. There is a lot of scatter in how long it takes for the Index to follow the indicator, and of course, the indicator is not perfect.
SHORT TRADE
I am still holding short positions, but I did exit some of the short positions and transitioned into VXX. (This books a loss for the trade for tax purposes and maintains a bearish stance.) I caution again to take it easy on this high risk stuff.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Tuesday it is trending flat to slightly down; a neutral to slightly bearish indication.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 52.8% Tuesday. It was 51.1% Monday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks improved to 55.1%. A value above 50% generally indicates an up-trend. The McClellan Oscillator dipped from -12 to -16 (percentage calculation method).
New-highs outpaced New-lows. The spread (new-highs minus new-lows) slipped to +163 Tuesday. (It was +165 Monday.) The 10-day moving average of the change in spread was +6. In other words, over the last 10-days, on average, the spread has increased by 6 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).
LONG TERM INDICATOR
Tuesday the Price indicator was positive; Sentiment, VIX and & Volume 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.
