Chicago PMI Falls … Unemployment Claims Climb … This Isn’t a Bull Market … Stock Market Analysis

Markets are closed Friday – Happy New Year!
 
CHICAGO PMI FALLS – LOWEST SINCE 2009 (Marketwatch)
“Economic activity in the Midwest contracted at the fastest pace in more than six years in December, according to the Chicago Business Barometer, also known as the Chicago PMI. The index fell to 42.9 from 48.7 in November…” Story at…
http://www.marketwatch.com/story/chicago-pmi-plummets-to-429-lowest-since-2009-2015-12-31
 
UNEMPLOYMENT CLAIMS (ABC News)
“More Americans requested unemployment benefits last week, but the level remains near historic lows in a positive sign for the job market…Applications for jobless aid jumped 20,000 to a seasonally adjusted 287,000…”
http://abcnews.go.com/Business/wireStory/us-applications-unemployment-benefits-jumped-week-36027209
 
WHAT BULL MARKET? (The Kindergarten)
“At present, just 28% of all NYSE names are in uptrends, or less than 1 in 3 stocks. That’s not a bull market.” – Josh Brown.  Commentary and analysis at…
http://welcometokindergarten.tumblr.com/about
 
MARKET REPORT / ANALYSIS        
-Thursday, the S&P 500 was down about 0.9% to 2045 at the close.
-VIX rose about 5% to 18.18.
-The yield on the 10-year Treasury dipped to 2.27.
 
“As an investor, you should remember that making money in the market is only one-half of the job. Keeping it is the other.” – Lance Roberts
 
Volume in the last hour was bigger than the volume in the first 5-1/2 hours. Unfortunately, down-volume was twice up-volume and the S&P 500 lost more than 6-points in the final hour of trading. The bulls must hope that these negatives don’t carryover to Monday. The first day of the month is usually an up-day since most mutual funds and retirement accounts are set to invest funds on the first.  It will be a bad sign for the markets if they aren’t positive on Monday.
 
My new “Money Trend” indicator tracks Up-$ vs. Down-$ vs the S&P; it reversed down Wednesday and was even more bearish Thursday. 
 
In a negative reversal, New-lows outpaced New-highs Thursday.  That is never a good sign for the markets.    
 
MARKET INTERNALS (NYSE DATA)
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 53.3% Thursday vs. 57.7% Wednesday.  (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks rose 49.2%. A value below 50% indicates a down trend.
 
The McClellan Oscillator (a Breadth measure) was still positive, but it moved down significantly.
 
New-lows outpaced New-highs. The spread (new-highs minus new-lows) was minus-11. (It was +32 Wednesday.)   The 10-day moving average of the change in spread was +6 Thursday.  In other words, over the last 10-days, on average; the spread has INCREASED by 6 each day. Market Internals remained neutral Thursday.
 
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).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.
 
NTSM         
Thursday, Sentiment, Price, & VIX indicators are neutral. Volume was negative and VIX was very close to a negative reading.  If the VIX climbs higher Monday I’ll probably have a Sell signal.  Since I already sold Thursday, a sell signal now won’t mean much to me, but a longer term sell signal now would be a bad sign for the markets.

MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On Wednesday, 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). The remaining 70% is invested in cash yielding about 2%.  Short-term bonds would be OK too. I remain bearish long-term.
 
I am using short-term indicators for long-term money.  That may be too conservative for many, but at least it is a strategy. Be warned: unless there is a correction, this strategy will probably underperform a buy-and-hold strategy.
 
See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

Home Sales Fall … Crude Inventories Rise … Stock Market Analysis

PENDING HOME SALES FALL (Reuters)
“Contracts to buy previously owned U.S. homes fell in November for the third time in four months, a signal that growth in the U.S. housing market could be cooling.
The National Association of Realtors (NAR) said on Wednesday its pending home sales index slipped 0.9 percent…” Story at …
http://www.reuters.com/article/us-usa-economy-idUSKBN0UD1CU20151230
 
CRUDE INVENTORIES RISE (Reuters vis CNBC)
“Inventories of U.S. commercial crude jumped by 2.6 million barrels in the week through Dec. 25, according to the Energy Information Administration.” Story at…
http://www.cnbc.com/2015/12/29/crude-oil-prices-drop-more-than-1-percent-as-weak-outlook-prevails.html
 
MARKET REPORT / ANALYSIS        
-Wednesday, the S&P 500 was down about 0.7% to 2063 at the close.
-VIX rose about 8% to 17.29.
-The yield on the 10-year Treasury dipped to 2.3.
 
“As an investor, you should remember that making money in the market is only one-half of the job. Keeping it is the other.” – Lance Roberts
 
Market Internals remained neutral. The Overbought-Oversold Index (Advance-Decline Ratio) remains OVERBOUGHT  and has been for the past 3-days. This is negative for the bulls.
 
My new “Money Trend” indicator tracks Up-$ vs. Down-$ vs the S&P; it reversed down Wednesday and is now bearish.  That was the short-term signal I was waiting for so I dropped back to 30% invested with long-term money.
 
I am using short-term indicators for long-term money.  That may be too conservative for many, but at least it is a strategy. This way I am out of the market at the first sign of trouble. Be warned though: unless there is a correction, this strategy will underperform a buy-and-hold strategy.
 
MARKET INTERNALS (NYSE DATA)
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped  to 57.6% Wednesday vs. 62.5% Tuesday.  (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks dropped 49.1%. A value below 50% indicates a down trend.
 
The McClellan Oscillator (a Breadth measure) was still positive, but it moved down significantly.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +32. (It was +67Tuesday.)   The 10-day moving average of the change in spread was +20 Wednesday.  In other words, over the last 10-days, on average; the spread has INCREASED by 20 each day. Market Internals remained neutral Wednesday.

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).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.
 
NTSM         
Wednesday, Sentiment, Price, Volume & VIX indicators are neutral.

MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On Wednesday, 30 Dec, I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). The remaining 70% is invested in cash yielding about 2%.  Short-term bonds would be OK too. I remain bearish long-term.
 
See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

Money Trend Has Reversed

As of 11AM, my Money Trend indicator has reversed so I am selling back to 30% invested in stocks today, Wednesday. (I'll be 70%-G; 30%-C in the TSP, Gov retirement account.) My conservative view is shaped by the many negative issues with the overall market. See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html
Further, the %-of new-highs has been falling even as the markets have been improving over the last month and the Overbought-Oversold Index (Advance-Decline Ratio) remains OVERBOUGHT. As a result, I am attempting to trade the market on a short-term basis with long-term money.  Since short-term timing is not a good strategy, this will probably underperform a buy-and-hold strategy if the markets do not correct.

Consumer Confidence … Dallas Fed Manufacturing … Be Cautious – When was the last 20% Correction? … Stock Market Analysis

CONSUMER CONFIDENCE UP (USA Today)
“Consumer confidence closed out 2015 on a high note amid solid job growth and falling gas prices. A closely watched index of Americans' outlook climbed to 96.5 in December…” Story at….
http://www.usatoday.com/story/money/2015/12/29/december-consumer-confidence/77993034/
 
DALLAS FED MANUFACTURING WORSE (Advisor Perspective)
“Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to -20.1 this month.” – Excerpt from the FED report. For details see Advisor perspectives at…
http://www.advisorperspectives.com/dshort/updates/Dallas-Fed-Manufacturing-Survey
 
RARIFIED AIR (Jesse Felder Tumblr)
This chart show days across the bottom (“X”-axis) vs. magnitude of the rallies on the “Y”-axis.  See his blog (linked below) for discussion…

Chart from Jesse Felder’s  Tumblr at…

http://jessefelder.tumblr.com/
 
MAINTAINING A LOW %-INVESTED IS A WISE MOVE NOW
The recent correction is a good example.  I was 50% invested and moved to 30% invested as the S&P 500 plummeted, but really, I got out too late. Since I started with a low %-invested in stocks I made out OK.  For example, if the correction had been 10% top to bottom, and I sold at the bottom, and bought back in at the top, I would have underperformed the S&P 500 by 2% {10% x (50%-30%)=2%}. In fact, I did slightly better under-performing the Index by about 1.5%. With a little luck, I could have easily come out ahead – in a significant downturn, I will.
 
MARKET REPORT / ANALYSIS        
-Tuesday, the S&P 500 was up about 1.1% to 2078 at the close.
-VIX fell about 5% to 16.08.
-The yield on the 10-year Treasury rose to 2.31.
 
“As an investor, you should remember that making money in the market is only one-half of the job. Keeping it is the other.” – Lance Roberts
 
Market Internals remained neutral. Up-volume is still a drag on the indicator, but overall, market internals look really good.  In fact, Breadth is looking too good since it is now significantly overbought.
 
As noted, the Overbought-Oversold Index (Advance-Decline Ratio) remains OVERBOUGHT  and has been for the past 2-days. This is one negative for the bulls.
 
My new “Money Trend” indicator tracks Up-$ vs. Down-$ vs the S&P and it remains bullish. It bounced up nicely Tuesday and remains bullish.
 
Until the market internals show more signs of distress, I remain “in”, but I am only willing to invest 50% in stocks since we are close to the all-time high of 2131. Keep risk low. If I get a short term sell signal, I will drop back to 30% invested with long-term money.
 
The Index is approaching the upper trend line that is now about 2100. Today was not a statistically-significant day so no reversal appears imminent. If we see a huge up-day, say in the 1.5%-range, I’d be very tempted to sell stocks back to 30%-invested. My strategy is to remain very conservative.  The S&P 500 peaked in Mid-May has not been able to break higher in the past 7-months.  That looks like a top to me, so I’ll be using short-term indicators for long-term money.  That may be too conservative for many, but at least it is a strategy. Be warned though: unless there is a correction, this strategy will underperform a buy-and-hold strategy.
 
MARKET INTERNALS (NYSE DATA)
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 62.5% Tuesday vs. 57.7% Monday.  (A number above 50% is usually GOOD news for the markets. At this level the news is almost too good. It is pushing the Advance-decline ratio well into overbought territory.)  On a longer term, the 150-day moving average of advancing stocks remained 49.2%. A value below 50% indicates a down trend.
 
The McClellan Oscillator (a Breadth measure) was positive and improved.
 
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +67. (It was +28 Monday.)   The 10-day moving average of the change in spread was +69 Tuesday.  In other words, over the last 10-days, on average; the spread has INCREASED by 69 each day. Market Internals remained neutral Tuesday.
 
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).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.
 
NTSM         
Tuesday, Sentiment, Price, Volume & VIX indicators are neutral.

MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
On 17 Dec I increased my invested position in my retirement account to 50% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). 50% is fully invested for me now; this is not the time for heroics, or accepting too much risk. I may not maintain a bullish stance for long; I’ll just see what the indicators have to say and I will move on the short term indicators. I am not bullish in the long-term.
 
See “Why the Bull Market May be Dead” in my 14 December blog at…
http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html