U.S. employment growth slowed more than expected in
August after two straight months of robust gains and wage gains moderated,
which could effectively rule out an interest rate increase from the Federal
Reserve this month. Nonfarm payrolls rose by 151,000 jobs last month after an
upwardly revised 275,000 increase in July...Americans worked fewer hours last month, with the average
workweek dipping to 34.3 hours from 34.4 hours in July….Average hourly earnings
increased three cents or 0.1 percent in August after a solid 0.3 percent rise
in July.” Story at...
FACTORY ORDERS (Fox News)
Orders to U.S. factories increased in July by the largest amount in nine months, propelled by a big jump in demand for commercial aircraft. Factory orders rose 1.9 percent in July…”
http://www.foxnews.com/us/2016/09/02/us-factory-orders-up-1-percent-in-july-best-in-months.html
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up 0.4% to 2180 at the close.
-VIX fell about 11% to 11.98 at the close.
-The yield on the 10-year Treasury remained 1.57%.
Markets continue to walk the tightrope as they relate to news. The Markets liked today’s “bad” news regarding lower than expected payrolls numbers and responded by moving up. It’s a tightrope because too much bad news will send the market downward; seemingly, so will too much good news since the FED comes back into play. So it’s all about the FED? Perhaps not; oil prices were up 2.6% today (Friday) and that’s a bullish factor that we have seen play out for some time.
The daily moves have gotten so small that today was a statistically significant day in my system. That means that price-volume exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Tuesday). The moves are small enough so that I’m not sure the analysis is still valid. My guess is that it is valid, so today may represent resistance and the Index may find it hard to move much higher in the short-term. Short-term bear indications remain...
Friday, Bollinger Bands are again as close as they have been in the last 6-months (closer than yesterday in fact). This officially qualifies as a “Bollinger Band Squeeze” and remains a bearish signal in the short-run. I’ve looked back as far as June of 2008 and couldn’t find a narrower squeeze than the one currently underway. This just shows that the markets are not very volatile and the daily moves are uniform. That is typically followed by a move down, but John Bollinger suggests that it means a breakout is coming and that could be up or down. My work suggests a move down, but it doesn’t have to be huge. I am guessing a roughly 5% pullback, but we’ll see.
VXX Trade. The calm-before-the-storm indicator (low standard of deviation in recent market moves) still remains down and today it hit a low that is lower than any number going back to 2009. (My records stop there.) That suggests that VXX remained a buy as of Friday’s close. While this has been going on for several weeks, it is not unusual and I’m still betting there’s a downturn ahead. In 2014 this indicator remained pointing down for 56 trading-days (nearly 3-months). At its worst the 2014 VXX trade was down 16%. When it reversed, the trade made a 12% positive return. Patience is the key, but this remains relatively high risk because VXX is so volatile.
Sentiment. CNBC had a story reporting that investors are bearish and that means the market will go up. Interestingly, my numbers show the opposite; Rydex traders are very bullish. The %-Bulls value (Bulls over Bulls + Bears) is now 76% (yesterday’s data). That means that 3 out of every 4 traders in the Rydex funds I track are betting bullish. That’s a bearish indication.
Not everything is bearish though. My short-term Money Trend indicator can be volatile; Friday it is trending slightly up; a neutral to slightly bullish indication. My sum of 16 Indicators is +4; also a slightly bullish indication.
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.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) jumped to 53.1% Friday. It was 49.1% Thursday. A number above 50% is usually BULLISH news for the markets.
On a longer term, the 150-day moving average of advancing stocks dipped to 54.8%. A value above 50% generally indicates an up-trend. The McClellan Oscillator improved from -32 to -1 (percentage calculation method).
New-highs outpaced New-lows. The spread (new-highs minus new-lows) improved to +199 Friday. (It was +78 Thursday.) The 10-day moving average of the change in spread was +9. In other words, over the last 10-days, on average, the spread has increased by 9 each day. Market Internals switched to positive 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, 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.
