CPI (MarketWatch)
“Higher rents and surging medical and prescription-drug
costs are putting a dent in the wallets and pocketbooks of American consumers,
new government data show.
The consumer price index rose 0.2% in August, according
to a government index that tracks the cost of living.” Story at…
MICHIGAN SENTIMENT (Economic Calendar)
“Preliminary consumer sentiment data for September
published by the University of Michigan showed sentiment below expectations,
but matching the final August reading. The Consumer Sentiment Index remained
even at 89.8.” Story at…
UH, OH – ADS BUSINESS CONDITIONS INDEX BELOW ZERO AGAIN
(Philly FED)
From the FED: “Note: We construct the ADS Index using the
latest data available as of September 15, 2016. The bold vertical lines provide
information as to which indicators are available for which dates. For dates to
the left of the left line, the ADS index is based on observed data for all six
underlying indicators. For dates between the left and right lines, the ADS
index is based on at least two monthly indicators (typically employment and
industrial production) and initial jobless claims. For dates to the right of
the right line, the ADS index is based on initial jobless claims and possibly
one monthly indicator. The limits used on the y axis reflect the minimum and
maximum values of the index over its entire history.” Chart from Philadelphia
Federal Reserve at…
My cmt: We note that the trend of lower highs in nationwide
Business Conditions continues. I didn’t draw it, but there have also been lower
lows since Q1 of 2015. It’s not good news, but it would need to fall a lot
further before I’d get concerned.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.4% to 2139 at
the close.
-VIX was down about 6% to 15.37 at the close. (The
Options Boys must think this pullback is over.)
-The yield on the 10-year Treasury remained 1.7%.
One indicator that many follow is simply a count of the
number of up or down days over a given period. It may be as simple as if a
stock closes down 3-consecutive days, it tends to outperform a week later. Currently there have been only 6-up days in
the past 2-weeks; this is a bullish signal, but maybe not this time. The moves in the S&P 500 have been so
small over the past 6-weeks that up-or-down has really made very little
difference. Like Bollinger bands and RSI, counting up or down days is probably
not a valid indicator now.
Friday, my collection of 16-indicators improved from -6
to -5. This is a negligible change and is meaningless. Indicators remain
negative though so this is a bearish indication overall, but not overly so.
New-highs outpaced new-lows today, not by much, same as
yesterday. This stat needs to continue
to improve if we are to avoid further pullback.
My Money Trend indicator remains headed down Friday, but
its rate of change is slowing and hinting at a turn to the upside.
Breadth is still flashing “Sell” short-term when compared
to the S&P 500; so overall the most likely market direction is down, but its
signal is not as strong as it has been.
As noted previously, I’d still like to see some
confirmation in the charts. A drop below the prior low of 2126 on higher volume
would confirm the bearish position. Otherwise, it will necessitate cutting back
on short positions.
SHORT TRADE
I am still holding short positions in SH (about half my
prior position) and QID. The possibility of further declines is still
reasonable and I will wait to see how the market reacts in the future.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) dropped to 49.4% Friday. It was 50.6% Thursday. A number below
50% is usually BEARISH for the markets short-term.
On a longer term, the 150-day moving average of advancing
stocks dipped to 55.1%. A value above 50% generally indicates an up-trend. The McClellan Oscillator fell from -28 to -41
(percentage calculation method).
New-highs outpaced New-lows. The spread (new-highs minus
new-lows) declined to +21 Friday. (It was +27 Thursday.) 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 decreased by 6 each day. New-high/new-low data still
points down but its rate of decline slowed sharply and is hinting at a turn-up.
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
Friday the Price was positive. Sentiment, Volume &
VIX indicators were neutral. The calm-before-the-storm indicator is “carry-over
negative”. Overall the long-term
indicator remained HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I reduced stock allocation to 30% stocks in the S&P
500 Index fund (C-Fund) Wednesday, 14 Sep in my long-term accounts based on the
Sell signal on 13 Sep. 30% invested is a good amount because in the unlikely
event the index were to be cut in half, I would only lose 15%. On the other hand, it keeps a decent amount
invested should the Index reverse up.
This is a very
conservative view given that market conditions seem relatively sanguine right
now. Since I am retired, my conservative position is reasonable for me and I sleep
well. Additionally, I have missed opportunities recently by ignoring my system
and for now I will follow the system.
