Jobless Claims…Personal Spending…Chicago PMI…Stock Market Correction

JOBLESS CLAIMS (Bloomberg)
“Applications for U.S. jobless benefits declined last week to the lowest level in 15 years, showing employers view a first-quarter slowdown in the economy is probably temporary. First-time filings for unemployment insurance fell by 34,000 to 262,000 in the week ended April 25, the lowest since April 15, 2000…” Story at…
http://www.bloomberg.com/news/articles/2015-04-30/jobless-claims-in-u-s-decrease-to-lowest-level-in-15-years
 
PERSONAL SPENDING (WSJ)
“U.S. consumer spending rose moderately in March, rebounding after a sluggish winter but suggesting Americans remain somewhat cautious despite months of cheaper gasoline and rising confidence. Personal spending, which measures purchases of everything from power tools to pedicures, increased a seasonally adjusted 0.4% from the prior month…” Story at…
http://www.wsj.com/articles/u-s-consumer-spending-rose-0-4-in-march-1430397215
 
CHICAGO PMI (MarketWatch)
The Chicago PMI jumped in April to a reading of 52.3 from 46.3 in March, to return above the 50-mark signaling expansion…"The bounce back in activity at the start of Q2 is consistent with a resumption of normal activity following the poor weather and port strikes earlier in the year…” said MNI Indicators Chief Economist Philip Uglow in a statement.” Story at…
http://www.marketwatch.com/story/chicago-pmi-back-in-positive-territory-for-april-2015-04-30
 
MARKET REPORT
-Thursday, the S&P 500 was down about 1% to 2086 at the close. 
-VIX was up about 9% to 14.55.
-The yield on the 10-year Treasury Note rose to 2.04%.
 
CORRECTION? YES or NO.
CORRECTION, YES.
-Market Internals are negative.
-The variability of market moves has dropped into the danger zone.  This is a very reliable indicator, but pullbacks can be small on this indication.
-XLI is underperforming the S&P 500 on every timeframe.  
-The S&P 500 dropped 0.2% below the 50-dMA and that may worry investors.

-I have been saying that I suspect any correction is weeks away; the numbers don’t look so good now.

 
CORRECTION, NO.
-Today was a statistically significant, down-day and that is usually followed by an up-day about 62% of the time.  Since the S&P 500 is at the 50-dMA, this may be signaling the Index will move up from here.
-As of Thursday, there have been only 47 “up-days” in the last 100-days.  This is usually a positive indication. If not, a correction from this “weak” level could be pretty bad.
-RSI dropped to 44 (14-day, SMA) RSI has not given an overbought indication since its oversold indication on 11 March.
-Thursday’s level is about where one would expect a bounce, based on the 50-day moving average of the S&P 500 and the general location of the lower trend line.
-Sentiment has been falling.
 
CORRECTION CONCLUSION
It looks like the markets may be in correction mode, but it’s not a done deal yet.  Tomorrow may give some more clues.  If the market continues down Friday, a correction is much more likely.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 47% at the close Thursday.  (A number below 50% is usually BAD news for the markets.) New-lows outpaced New-highs Thursday. The spread (new-highs minus new-lows) was minus-14. (It was +21 Wednesday.)  The 10-day moving average of change in the spread was minus-7.  In other words, over the last 10-days, on average; the spread has declined by 7 each day.

Internals turned negative on the markets.

 

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, the NTSM analysis remained HOLD. PRICE, VOLUME, VIX and SENTIMENT indicators are neutral, although (as always) sentiment remains extremely high.

MY INVESTED STOCK POSITION

I remain fully invested at 50% invested in smaller cap-stocks in the long-term portfolio with some international stocks. 50% is conservative, but appropriate for a conservative retired guy. 
 
The Dow Jones US Completion Index (all stocks except the S&P 500 – the “S” fund in the TSP) continues to outperform the S&P 500.  Since 1 February it is 2% ahead of the S&P 500. The S&P 500 Index has gained during earnings season since earnings were not as bad as feared.  Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 3.1% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 50%-G; 10%-C; 25%-S; 15%-I.  (50% cash is too high for non-retirees, however, the “G”-fund did return 2.2% over the last 12-months and that is exceptional for risk-free money.)

FOMC Meeting…GDP Stalls…Crude Inventories

FOMC MEETING (USA Today)
“The Federal Reserve lowered its economic outlook Wednesday after a harsh winter chilled the U.S economy's growth, reducing the odds for an initial interest rate hike as soon as the Fed's June meeting. In a statement after a two-day meeting the Fed gave no clear signal of when it plans to raise its benchmark interest rate for the first time since 2006 but policymakers have indicated they expect to act this year…Many economists say the Fed is unlikely to act until September at the earliest so it can assess whether the economy is regaining the momentum it had built last year.” Story at…
http://www.usatoday.com/story/money/2015/04/29/april-fed-meeting/26567511/
 
GDP STALLS OUT (WSJ)
“Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 0.2% seasonally adjusted annual rate in the first quarter…’This is another quarterly number which confirms the long-term slow-growth thesis, but there are good odds we get a bit of a bounce later in the year from stabilized business spending and the housing markets, which are setting up quite promising,’ Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott, said in a note to clients.” Story at…
http://www.wsj.com/articles/u-s-gdp-expands-at-0-2-pace-in-first-quarter-1430310699
 
CRUDE INVENTORY AND US PRODUCTION (Reuters)
“Oil prices hit the highest this year on Wednesday after the first crude stock draw in five months at the U.S. Cushing, Oklahoma hub suggested an oil glut may be starting to ease. Government data showing a smaller-than-expected rise last week in crude inventories throughout the United States also aided sentiment, although some traders felt the market was ignoring bearish elements like higher production.”  Story at…
http://www.reuters.com/article/2015/04/29/us-markets-oil-idUSKBN0NK03420150429
 
MARKET REPORT
-Wednesday, the S&P 500 was down about 0.4% to 2107 at the close. 
-VIX was up about 8% to 13.39.
-The yield on the 10-year Treasury Note rose to 2.04%.
 
CORRECTION WATCH
-The variability of market moves has dropped into the danger zone. 
-As of Wednesday, there have been only 47 “up-days” in the last 100-days and that is less than 50%.  So by that measure, a correction (if it were to start now) would be starting from a weak point. That might suggest a bigger down-turn.  Perhaps we’ll finally get that 10% correction on a closing basis that has been so elusive.  There are often dual interpretations though, and only 48 up-days in the last 100 can be seen a positive indicator too.
-RSI dropped to 56 (14-day, SMA) RSI has not given an overbought indication.
-I suspect any correction is weeks away.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 49.5% at the close Wednesday.  (A number below 50% is usually BAD news for the markets.) New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +21. (It was +40 Tuesday.)  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 turned negative on the markets.

 

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, the NTSM analysis remained HOLD. The PRICE indicator is positive. VOLUME, VIX and SENTIMENT indicators are neutral, although (as always) sentiment remains extremely high.

MY INVESTED STOCK POSITION

I remain fully invested at 50% invested in smaller cap-stocks in the long-term portfolio with some international stocks. 50% is conservative, but appropriate for a conservative retired guy. 
 
The Dow Jones US Completion Index (all stocks except the S&P 500 – the “S” fund in the TSP) continues to outperform the S&P 500.  Since 1 February it is 2.5% ahead of the S&P 500. The S&P 500 Index has gained during earnings season since earnings were not as bad as feared.  Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 3.1% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 50%-G; 10%-C; 25%-S; 15%-I.  (50% cash is too high for non-retirees, however, the “G”-fund did return 2.2% over the last 12-months and that is exceptional for risk-free money.)

Consumer Confidence…Stock Market Crash in 2016 or 2017…Sentiment

CONSUMER CONFIDENCE DOWN (Bloomberg)
“The Conference Board’s consumer confidence index dropped to a four-month low of 95.2 in April, weaker than the most pessimistic forecast in a Bloomberg survey of economists… Purchases rose less than projected in March -- up 0.9 percent after three straight declines…Instead, consumers were pocketing the windfall from the drop in gasoline prices and gains in employment. The saving rate climbed to 5.8 percent in February, the third straight increase and the highest in more than two years. Story at…
http://www.bloomberg.com/news/articles/2015-04-28/consumer-confidence-index-in-u-s-decreased-to-95-2-in-april

CRASH IN 2016/2017 (Financial Sense) "The US has not broken out of its bull market into a bear yet, but it is having a struggling period and probably in the second half of the year, let’s say from June onwards, it will breakout upwards for another run. However the same model goes on to say that the sixth and seventh years of the decade [2016 and 2017] have a high probability of being negative, and really quite largely negative. So we’re coming up to a sell but we’re not at the sell yet.” - Robin Griffiths, Chief Technical Strategist at ECU Group in London. Interview at…http://www.financialsense.com/contributors/robin-griffiths/us-market-bubble-crash-2016-2017
 
SENTIMENT
Sentiment (percentage of bulls) keeps going in a bullish direction…down.   I calculate Sentiment as {Bulls/(Bulls+Bears)} using amounts invested in selected Rydex/Guggenheim funds.  Currently the 5-day sentiment value is 80%-bulls.  An extreme value, but down from its recent high of 84%-bulls on 5 March of 2015.  That doesn’t sound like much of a drop, but when you consider it has taken almost 2-months of steady decline for sentiment to fall 4%, it is significant.  I think this means that the markets can advance from here. Sentiment would need to be 85% to give a sell signal in the NTSM system and that would only be for the one indicator – not enough to create a sell overall. Sentiment is not a good indicator because it is not timely, but it does show a reduction in overly bullish attitudes by investors.
 
MARKET REPORT
-Tuesday, the S&P 500 was up about 0.3% to 2115 at the close. 
-VIX was down about 5% to 12.41.
-The yield on the 10-year Treasury Note rose to 2.00%.
 
CORRECTION WATCH
-If VIX drops to 12 I’ll start to worry.
-The variability of market moves has dropped into the danger zone. 
-As of Tuesday, there have still been only 48 “up-days” in the last 100-days and that is less than 50%.  So by that measure, a correction (if it were to start now) would be starting from a weak point. That might suggest a bigger down-turn.  Perhaps we’ll finally get that 10% correction on a closing basis that has been so elusive.  There are often dual interpretations though, and only 48 up-days in the last 100 can be seen a positive indicator too.
-RSI is remained 63 (14-day, SMA) and that’s not close to an overbought indication.
-I suspect any correction is weeks away.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained 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 +40. (It was +76 Monday.)  The 10-day moving average of change in the spread was minus-3.  In other words, over the last 10-days, on average; the spread has declined by 3 each day.
Internals remained neutral on the markets, but deteriorated somewhat.

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, the NTSM analysis remained HOLD. PRICE, VOLUME, VIX and SENTIMENT indicators are neutral, although (as always) sentiment remains extremely high.

MY INVESTED STOCK POSITION

I remain fully invested at 50% invested in smaller cap-stocks in the long-term portfolio with some international stocks. 50% is conservative, but appropriate for a conservative retired guy. 
 
The Dow Jones US Completion Index (all stocks except the S&P 500 – the “S” fund in the TSP) continues to outperform the S&P 500.  Since 1 February it is 2.8% ahead of the S&P 500. The S&P 500 Index has gained during earnings season since earnings were not as bad as feared.  Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 3.6% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 50%-G; 10%-C; 25%-S; 15%-I.  (50% cash is too high for non-retirees, however, the “G”-fund did return 2.2% over the last 12-months and that is exceptional for risk-free money.)

Earnings Report…Margin Debt at Record High

EARNINGS REPORT FROM FACTSET (Factset)
“With 40% of the companies in the S&P 500 reporting actual results for Q1 to date, the percentage of companies reporting actual EPS above estimates (73%) is equal to the 5-year average, while the percentage of companies reporting actual sales above estimates (47%) is well below the 5-year average….The blended revenue decline for Q1 2015 is -3.5%. If this is the final revenue decline for the quarter, it will mark the first year-over-year decrease in revenue since Q1 2013 (-0.3%), and the largest year-overyear decline in revenue since Q3 2009 (-11.5%).” “Earnings Insight” from Factset at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.24.15/view
 
MARGIN DEBT AT RECORD HIGH – A BEARISH INDICATOR (Advisor Perspectives)
“The latest debt level is up 2.5% month-over-month and at a record high. Real (inflation-adjusted) debt rose 1.9% month-over-month and also at a record high.” Commentary and analysis from Doug Short at…
http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php
Margin is essentially the practice of borrowing money from your broker to buy more stocks using the stocks as collateral on the loan.  Needless to say, it is risky because if the value of your stocks falls, your broker will call and demand more collateral. This “”margin call” forces the borrower to sell some stocks to raise cash to reduce the size of loan. Thus, it can create a cascading down market due to forced selling. In the past, margin peaks have coincided with market tops. A breaking point is coming…we just don’t know when.
 
MARKET REPORT
-Monday, the S&P 500 was down about 0.4% to 2109 at the close. 
-VIX was up about 7% to 13.12.
-The yield on the 10-year Treasury Note rose slightly to 1.92%.
 
CORRECTION WATCH
-VIX popped up today getting away from the low value of 12 that was a correction start point back in September. On the other hand, a rising VIX can spell trouble too, so I’ll watch to see if today's trend continues.
-The variability of market moves has dropped into the danger zone. 
-As of Monday, there have been only 48 “up-days” in the last 100-days and that is less than 50%.  So by that measure, a correction (if it were to start now) would already be starting from a weak point. That might suggest a bigger down-turn.  Perhaps we’ll finally get that 10% correction on a closing basis that has been so elusive.  There are often dual interpretations though, and only 48 up-days in the last 100 can be seen a positive indicator too.
-RSI is now 63 (14-day, SMA) and that’s not close to an overbought indication.
-I’ll suspect any correction is probably weeks away.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained to 53% at the close Monday.  (A number above 50% is usually GOOD news for the markets.) New-highs outpaced New-lows Monday. The spread (new-highs minus new-lows) was +76. (It was +102 Friday.)  The 10-day moving average of change in the spread was minus-2.  In other words, over the last 10-days, on average; the spread has declined by 2 each day.
 
Internals remained neutral on the markets; “advancing volume” (or up-volume as it is sometimes called in the internals) is still increasing on a 10-day basis.  That is usually a positive development.  It will definitely be positive if it continues.

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         
Monday, the NTSM analysis remained HOLD. PRICE is positive. VOLUME, VIX and SENTIMENT indicators are neutral, although (as always) sentiment remains extremely high.

MY INVESTED STOCK POSITION
I remain fully invested at 50% invested in smaller cap-stocks in the long-term portfolio with some international stocks. 50% is conservative, but appropriate for a conservative retired guy. 
 
The Dow Jones US Completion Index (all stocks except the S&P 500 – the “S” fund in the TSP) continues to outperform the S&P 500.  Since 1 February it is 3.0% ahead of the S&P 500. The S&P 500 Index has gained on the smaller cap stocks during earnings season since earnings were not as bad as feared for the big boys.  Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 3.8% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 50%-G; 10%-C; 25%-S; 15%-I.  (50% cash is too high for non-retirees, however, the “G”-fund did return 2.2% over the last 12-months and that is exceptional for risk-free money.)