“The economy in the U.S. expanded at a slower pace in the fourth quarter than previously reported, restrained by a smaller gain in stockpiles and widening trade gap, even as consumers continued to provide support. Gross domestic product, the value of all goods and services produced, rose at a 2.2 percent annualized rate, down from an initial estimate of 2.6 percent…” Story at…
http://www.bloomberg.com/news/articles/2015-02-27/u-s-gdp-grew-less-than-previously-estimated-in-fourth-quarter
CHICAGO PMI PLUMMETS (Briefing.com)
“The Chicago PMI declined to 45.8 in February from 59.4 in January. The Briefing.com Consensus expected the index to fall to 58.0…The Chicago PMI has little overall economic value, and is only watched by the financial markets because it is usually released one day in advance of the similar national ISM manufacturing survey.” Details at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/chi.htm
This was a stunning decline and shows the Chicago region in decline. The Richmond Fed released data showing a neutral reading (no expansion, but no contraction either) that was also well below expectations earlier this week. The National ISM next Monday may move the market if it also misses expectations.
MICHIGAN SENTIMENT (Bloomberg)
“Consumer confidence cooled in February from an 11-year high, reflecting recent gains in fuel costs and bad winter weather in parts of the U.S. The University of Michigan final index of sentiment fell to 95.4, the first decrease in seven months, from January’s 98.1 that was the highest since the start of 2004.” Story at…
http://www.bloomberg.com/news/articles/2015-02-27/consumer-sentiment-in-u-s-cooled-in-february-from-11-year-high
MARKET REPORT
- Friday, the S&P 500 was down about 0.3% to 2105 (rounded).
-VIX fell about 4% to 13.34.
-The yield on the 10-year Treasury Note fell to 1.99%.
RSI was 76 Friday – a neutral indication for the short term.
Volume finally picked up Friday, and was about 6% above the monthly average on the NYSE. Unfortunately, it was on a down day and that only reinforces worries.
A pullback is getting closer, but I can’t tell whether it’s a few days away or a few weeks. A pullback would be a 5-6% normal cycle down unless the news gets bad.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped 54% at the close Friday. (A number above 50% is usually GOOD news for the markets.) New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +83. (It was +111 Thursday). The 10-day moving average of change in the spread was minus-9. In other words, over the last 10-days, on average, the spread has DECLINED by 9-each day.
Internals remained neutral on the market, but they are now trending down over the last 10-days.
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
Friday, the NTSM analysis remained HOLD. The PRICE indicator is positive;
VIX, VOLUME and SENTIMENT indicators are neutral, although sentiment remains
extremely high.
I remain fully invested at 50% invested in stocks in the long-term portfolio. 50% is conservative, but appropriate for a retired guy.
My position in the S&P 500 is very small now. I have invested in the Dow Jones US Completion Total (^DWCPF) and an EAFE based fund because they are the only small-cap and international choices in my retirement account. (The DWCPF includes all stocks EXCEPT the S&P 500. The EAFE includes Europe and the Far East. The DWCPF is 1.6% ahead of the S&P 500 since 1 February.)
Crude Oil Train Burns near Charleston, West Virginia (16
Feb 2015)