“Job openings surged to more than 5 million in December, according to the latest job openings and labor turnover survey, or JOLTS report, from the BLS. At 5.028 million, job openings were at their highest level since January 2001.” Story at…
http://www.businessinsider.com/job-openings-and-labor-turnover-survey-february-10-2015-2
DISMAL RETURNS AHEAD (Hussman Funds)
“The combination of widening credit spreads,
deteriorating market internals, plunging commodity prices, and collapsing
yields on Treasury debt continues to be most consistent with an abrupt slowing
in global economic activity. Generally speaking, joint market action like this
provides the earliest signal of potential economic strains, followed by the new
orders and production components of regional purchasing managers indices and
Fed surveys, followed by real sales, followed by real production, followed by
real income, followed by new claims for unemployment, and confirmed much later
by payroll employment…By our estimates, never in history, prior to the past
5 weeks, have the prospective 10-year nominal annual total returns of both
stocks and Treasury
bonds been below 2% at the same time. We currently project a 10-year
nominal annual portfolio total return averaging only about 1.7% annually for
anything close to a standard portfolio mix of equities, bonds and cash –
regardless of” how much diversification one has within each of those asset
classes.” – John Hussman, PhD, Weekly Market Commentary, 8 Feb 2015. Commentary
at…http://www.hussmanfunds.com/wmc/wmc150209.htm
A LOOK AT YIELD SPREADS IN TREASURIES
When John Hussman refers to credit spreads I think he is referring to the difference between Corporate Bonds and Treasury Notes. A widening spread (the difference between the two is getting larger) means that corporate borrowers may have a harder time getting credit. It got me thinking though, so I thought I’d look at a credit spread of a different sort.
I chose to look at the spread between the 30-year treasury yield (^TYX) vs. the 5-year treasury yield (^FVX). The 30-year bond should have a higher yield given the higher risk of a 30-year bond. As the spread declines (the difference between the two gets smaller) investors worry that they may actually reverse thus creating an inverted yield curve. That means that the longer term security has a lower yield than the short term. This suggests a recession because the longer term outlook is worse than the current one. In the chart below one can see that is exactly what occurred in late 1999 and early 2000 as the spread (30-yr yield minus 5-yr yield shown in Red) dipped into negative territory below the green line. (It also predicted the dot.com crash.)
PRO: SMALL CAPS WILL UNDER PERFORM – WHY?http://finance.yahoo.com/video/two-strategists-big-view-150100348.html
Hmmmm. Perhaps my swing to smaller caps is not such a great idea. I’ll re-evaluate later. Presently, the Dow Jones Completion Index has outperformed the S&P 500 by about 1% in February.
- Tuesday, the S&P 500 was up about 1% to 2069 (rounded).
-VIX was down about 7% to 17.23.
-The yield on the 10-year Treasury Note rose to 1.99%.
STILL WATCING THE CHARTS (REPEATING THIS UNTIL IT RESOLVES)
The S&P 500 made it to 2069 today. The 2060’s have been a resistance area. Let’s see if it can close there again tomorrow. That would be bullish.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 53% at the close Tuesday. (A number above 50% is usually GOOD news for the markets.) New-highs outpaced New-lows Tuesday. The spread (new-highs minus new-lows) was +48. (It was +37 Monday). The 10-day moving average of change in the spread was minus-23. In other words, over the last 10-days, on average, the spread has DECREASED by 23-each day.
Internals remained neutral on the market. New-hi/new-low data is not looking good right now.
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
Tuesday, the NTSM analysis is HOLD. The PRICE indicator is positive; VIX, Sentiment and Volume are neutral. All indicators have improved and may give a buy reading if we can have another good day Wednesday.
MY INVESTED STOCK POSITION
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) instead, because that is the only small-cap choice in my retirement account. (The DWCPF includes all stocks EXCEPT the S&P 500.) I expect small caps to outperform multi-nationals this year. For my reasoning see “Time to Lean Toward Small Caps” at…
http://navigatethestockmarket.blogspot.com/2015/01/fomc-meetinglean-toward-small.html
