Monday, October 31, 2016

Personal Income … Personal Spending Personal Consumption Expenditure Index … Chicago PMI … Stock Market Analysis

PERSONAL INCOME/PERSONAL SPENDING/PCE PRICE INDEX (Briefing.com)

“The Personal Income and Spending report for September was mostly in-line with expectations…
…The PCE Price Index was up 0.2% month-over-month and 1.2% year-over-year, which was up from 1.0% year-over-year in August and tracking toward the Fed's longer-run inflation target of 2.0%... it left every reason to think the Fed is still on a path to a rate hike before the end of the year.” Commentary and charts at…
 
CHICAGO PMI (MarketWatch)
“A measure of Chicago-area economic activity faltered in October, suggesting the economy lost some momentum seen in the third quarter.
MNI Indicators said Monday the Chicago PMI fell to 50.6, a drop of 3.6 points, bringing the index to its lowest level since May.” Story at…
 
GUEST COMMENTARY (Raymond James)
“Last Friday we entered the strongest five days of the year and the proverbial bullish carrot in front of the horse could be this week’s FOMC meeting, Employment Report, and the ISM Manufacturing numbers. In point of fact, tomorrow we enter the strongest six months of the year! For this week, however, we expect the FOMC to be a non-event and for nonfarm payrolls to edge higher. Speaking of “higher,” while our models are calling for higher stock prices, so is the D-J Transportation Average…” – Jeffrey Saut, Raymond James, 31 Oct 2016. Commentary at…
 
MARKET REPORT / ANALYSIS        
-Monday the S&P 500 was unchanged at 2126 on the day.
-VIX rose about 5% to 17.06.
-The yield on the 10-year Treasury slipped to 1.83%.
 
Short-term indicators continue to be mixed.
 
The “Calm-Before-the-Storm” indicator (based on statistical analysis of market action) was bearish again today. I have used VXX in the past to take advantage of this indicator. That VXX trade is looking OK for now, although I never did take a VXX position this time. The VXX trade is up 4.4% from the day this indicator flashed negative in my system.  Given that other indicators are not confirming a turn down now, I‘d be inclined to take profits in this trade.  (RSI was actually bullish Friday.)
 
Curiously, the day my calm-before-the-storm indicator flashed negative, I saw the following on a trader board: “3.5 MM shares VXX just got hit in AH, haven't seen that in a while, if ever.” That would be a VXX purchase in the 100-million dollar range.
 
Monday was the fifth straight down-day and that suggests an up day Tuesday or a possible bigger breakdown ahead. For now, I’m again guessing Tuesday will be an up-day. (I guessed Monday would be up too, but I’ll take the draw.)
 
All-in-all…mixed short-term signals continue so I have not taken a short-term Trading Position.
 
Long-term, I’m fully invested at 50% in stocks (a conservative-retiree allocation) – I remain “hold-my-nose” bullish.
 
TRADING PORTFOLIO
Long Volatility ETF (VXX): Established 5 Aug. SOLD 15 Sep. Gain: +6.6%.
2x S&P 500 ETF (SSO): Established 22 Sep. SOLD 7 Oct. Loss: -1.5%.
2x Short S&P 500 (SDS): Established 7 Oct. SOLD 10 Oct. Loss: -1.4%.
2x Short Dow 30 (SDOW): Established 17 Oct. SOLD 18 Oct Loss: -0.4%
2x Dow (DDM) Established 18 Oct. SOLD 21 Oct Loss: -0.9
 
MONDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks advancing (NYSE): 49.3%. (48.3% yesterday.) A number below 50% is usually BEARISH for the markets short-term.
-150-day moving average of advancing stocks: 52.8%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: improved from -45 to -38 (percentage calculation method).
-New-highs minus new-lows: -16 (It was -29 yesterday.) New-lows again outpaced new-highs – not a good sign.
-10-day moving average of the change in spread: -2. In other words, over the last 10-days, on average, the spread has decreased by 2 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
Monday the VIX indicator is negative. Price, Volume, & Sentiment indicators were neutral. Overall the long-term indicator remained HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 23 Sep in my long-term accounts based on a number of indicators. Remainder is 50% G-Fund. This is a conservative retiree allocation.

Friday, October 28, 2016

GDP – Advance Estimate … Michigan Sentiment … How Obama Helped Trump Win the White House … Stock Market Analysis

GDP (Business Insider)
“US gross domestic product grew at an annualized rate of 2.9% in the third quarter, its fastest in two years, according to the advance estimate released Friday.” Story at…
 
MICHIGAN SENTIMENT (Bloomberg)
“Consumer confidence dropped more than previously reported to match the lowest level since 2014, with Americans less upbeat about both current and future conditions in the weeks before the presidential election. The University of Michigan said Friday that its final index of sentiment fell to 87.2 from 91.2 in September.” Story at…
 
OFF TOPIC
Like the writer in the below piece, I am not voting for either major party candidate (so don’t get your dander up); I just thought the following article was interesting.
HOW OBAMA HELPED TRUMP WIN THE WHITEHOUSE (Safehaven)
“It is incredible to me, since I am just as cynical as the rest of the electorate, that when the Affordable Care Act was passed the open enrollment date was systematically placed just a few days before Election Day. That was either great confidence ("this is going to be great! They'll love us and vote for us!"), great hubris ("it doesn't matter whether this works, the sheeple will vote for us anyway") or great carelessness ("oh, rats, didn't think of that"). Because we now know that over the next several days, millions and millions of Americans will receive letters explaining to them that their existing plan will be outrageously more expensive in 2017 – in some cases, premiums will double – or may not be available at all.” – Michael Ashton. Commentary at…
My cmt: I have never understood how it makes economic sense to cover people after they get sick. Imagine if you could buy car insurance after you had an accident. Sure I completely understand why everyone wants health insurance to cover pre-existing conditions, but can an economically viable system be developed that will do it? Apparently, it’s not Obamacare.
 
MARKET REPORT / ANALYSIS        
-Friday the S&P 500 was down about 0.3% to 2126 on the day.
-VIX rose about 5% to 16.12 near the close.
-The yield on the 10-year Treasury rose to 1.85%. (Bond prices fall when yields rise.  It’s unusual to see Stock and Bond prices both falling. With the 10-year approaching 2% another bond-rout is apparently underway.)
 
S&P 500 fell nearly 1% after the FBI announced it was looking into additional Clinton emails. It recovered some of the losses after 2PM. (Apparently, the market doesn’t like “The Donald.” Look at the bright side.  Clinton gets elected; Clinton gets impeached; Tim Caine is President. Now that wasn’t so bad was it?)
 
Short-term indicators continue to be mixed.
 
The “Calm-Before-the-Storm” indicator (based on statistical analysis of market action) was bearish again today. That VXX trade is looking OK now.  Too bad I didn’t take it, but there still may be a better set-up coming.
 
Friday was the fourth straight down-day and that suggests an up day Monday or a possible bigger breakdown ahead. For now, I’m guessing Monday will be an up-day.
 
Both Bollinger Bands and RSI are bullish or very nearly so.  The  INDUSTRIAL SELECT SECTOR SPDR ETF (XLI) is now outperforming the S&P 500 on about half of the time frames I follow. Yesterday it was underperforming them all from 10-days to 100-days. This is a mildly bullish sign.
 
All-in-all…mixed short-term signals abound so I have not taken a Trading Position.
 
Long-term, I’m fully invested at 50% in stocks (a conservative-retiree allocation) – I remain “hold-my-nose” bullish. Amazon has been one of the stalwarts of this market over the last 2-years.  Their poor earnings report is disconcerting.
 
TRADING PORTFOLIO
Long Volatility ETF (VXX): Established 5 Aug. SOLD 15 Sep. Gain: +6.6%.
2x S&P 500 ETF (SSO): Established 22 Sep. SOLD 7 Oct. Loss: -1.5%.
2x Short S&P 500 (SDS): Established 7 Oct. SOLD 10 Oct. Loss: -1.4%.
2x Short Dow 30 (SDOW): Established 17 Oct. SOLD 18 Oct Loss: -0.4%
2x Dow (DDM) Established 18 Oct. SOLD 21 Oct Loss: -0.9
 
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks advancing (NYSE): 48.3%. (49.3% yesterday.) A number below 50% is usually BEARISH for the markets short-term.
-150-day moving average of advancing stocks: 52.9%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: declined from -41 to -45 (percentage calculation method).
-New-highs minus new-lows: -29 (It was -2 yesterday.) New-lows again outpaced new-highs. This is a worrisome stat.  New-hi/new-lo data is the battleship of indicators.  It is slow to turn and can signal real trouble when it does.  I’ll give it another day or two before I panic.
-10-day moving average of the change in spread: -6. In other words, over the last 10-days, on average, the spread has decreased 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
Friday the Price, VIX, Volume, & Sentiment indicators were neutral. Overall the long-term indicator remained HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 23 Sep in my long-term accounts based on a number of indicators. Remainder is 50% G-Fund. This is a conservative retiree allocation.