“Initial unemployment-insurance claims fell to 289,000 this week, from 295,000 a week ago…. "The underlying trend in claims, we believe, is still 285-to-290K, low enough to signal very strong payroll growth, assuming indicators of the hiring side of the payroll equation remain strong," Pantheon Macroeconomics Chief Economist Ian Shepherdson said.” Story at…http://www.businessinsider.com/initial-jobless-claims-dec-13-2014-2014-12
PHILADELPHIA FED (Reuters via CNBC)
“Factory activity in the U.S. mid-Atlantic region grew at a slower pace in December, a survey showed on Thursday. The Philadelphia Federal Reserve Bank said its business activity index fell to 24.5 from 40.8 the month before. That was shy of economists' expectations for 27, according to a Reuters poll.” Story at…
http://www.cnbc.com/id/102280830
LEADING INDICATORS (MarketWatch)
“The leading economic index rose 0.6% in November, indicating the U.S. is likely to expand at a fairly robust pace in the next few months, according to the Conference Board said. "The increase in the LEI signals continued moderate growth through the winter season," Ken Goldstein, economist at the board, said Thursday.” Story at….
http://www.marketwatch.com/story/us-leading-indicators-climb-06-in-november-2014-12-18?dist=lcountdown
MARKET REPORT
Thursday, the S&P 500 was UP 2.4% to 2061 (rounded).
VIX was down about 14% to 16.81.
The yield on the 10-year Treasury Note rose to 2.21.
Thursday was another statistically significant day. That would lead to a down day tomorrow (Friday) about 62% of the time. (A statistically-significant day occurs in my system when the size of the day’s move is larger than the recent normal as measured by standard deviation from the norm.) There have been 8-statistically significant days in the last 3-weeks. That usually happens after a top, but other indicators are not confirming a top.
The market internals have reversed dramatically, especially new-hi/new-lo data, and that is indicative of a market bottom. It’s pretty odd. I can’t remember a nearly straight down move over 7-sessions followed by a straight up move that almost got back to the old highs in 2-sessions that wasn’t in the midst of a major correction. I’m not saying this is a major correction; but rather the opposite – these moves came out of the blue seemingly based on falling oil.
Today, Thursday, oil was down between 2% (Brent) and 3% (USO) while stocks screamed up. Now falling oil is good for the stock market?
Chart wise the S&P 500 is close to the upper trend line so if anything upside potential is somewhat subdued here so I am not in a great rush to get in, but I will strictly follow my numbers if I get a buy signal.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was significantly higher to 48% at the close Thursday. (A number below 50% is usually BAD news for the markets.) In a reversal, New-highs outpaced New-lows Thursday. The spread (new-highs minus new-lows) was +168. (It was -36 Wednesday). The 10-day moving average of change in the spread was +12. In other words, over the last 10-days, on average, the spread has INCREASED by 12-each day.
Internals remained neutral on the market, but only because the 10-day moving average of %-stocks advancing has not broken above 50%.
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 2013, using these
internals alone would have made a 16% return vs. 30% for the S&P 500 (in on
Positive out on Negative – no shorting).
Of course, few trend-following systems will do well in an extreme
low-volatility, straight-up year like 2013.
NTSM
The long-term NTSM system analysis switched to HOLD today.
MY INVESTED STOCK POSITION
I am 30% invested in stocks as of 16 Dec based on the
SELL signal Monday. Given the improved market internals, I am tempted to increase exposure to the stock market to a 50% level, but I am not comfortable with recent market action. I suspect a lot of today’s move was due to early Santa Clause positioning, i.e., the Santa rally happened today. With the Index near the upper trend line there is little upside potential in the near term so I am not inclined to rush back in. The Holidays will most likely be characterized by low volume and more confusion. Bottom line: I will move when signals become clearer.
