Durable Goods Orders…Correction Watch

DURABLE GOODS ORDERS (USA Today)
“Orders for long-lasting goods unexpectedly surged in March, but a measure of business investment fell for the seventh straight month. Orders for manufactured durable goods such as computers, metals and electrical equipment rose 4% on a healthy rebound in motor vehicles and transportation…” Story at…
http://www.usatoday.com/story/money/business/2015/04/24/march-durable-goods-orders/26293405/
 
For details on durable goods see Doug Short’s commentary at….
http://www.advisorperspectives.com/dshort/updates/Durable-Goods-Orders.php

MARKET REPORT
-Friday, the S&P 500 was up about 0.2% to 2118 at the close. 
-VIX was down about 2% to 12.29.
-The yield on the 10-year Treasury Note dropped to 1.91%. 
 
CORRECTION WATCH
VIX is getting to a low area that has been a starting point for small pullbacks in the recent past. In addition, certain statistical measures are also suggesting a pullback in the coming 2 or 3 weeks. The variability of market moves has dropped into the danger zone.  My guess is that the markets will move higher this time before we have a pullback.  That’s just a guess. I also don’t know how big of pullback might be ahead.  As of Friday, 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. To show my true confusion, the RSI is now 65 (14-day, SMA) and that’s not close to an overbought indication so again, I’ll suggest any correction is probably weeks away.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 53% 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 +102. (It was +105 Thursday.)  The 10-day moving average of change in the spread was minus-1.  In other words, over the last 10-days, on average; the spread has declined by 1 each day.
 
Internals remained neutral on the markets, but it’s nice to see “advancing volume” (or up-volume as it is sometimes called in the internals) increasing on a 10-day basis.

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         
Friday, 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 3.5% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 2.8% 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.)