“The ISM Manufacturing Index declined to 51.5 in March from 52.9 in February…Nearly all of the regional manufacturing surveys pointed toward a sharp deceleration in the national manufacturing index. The drop in the ISM Index shouldn't have been much of a surprise…It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.” Details and charts at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/napm.htm
ADP EMPLOYMENT REPORT – GAINS MISS BY 36,000 (USA Today)
“Businesses added 189,000 jobs in March, payroll processor ADP said Wednesday, in a sign the labor market may be slowing after a series of strong gains. That's the smallest advance since January 2014 and the first month since then that ADP has reported net payroll additions below 200,000.” Story at…
http://www.usatoday.com/story/money/business/2015/04/01/march-adp-employment-report/70743326/
YIELD SPREAD UPDATE
Here’s an update of the spread between the 30-year treasury yield (^TYX) vs. the 5-year treasury yield (^FVX). To calculate the spread, subtract the 5-yr yield from the 30-year yield.
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. That would suggest a coming recession because the longer term outlook would be 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) prior to the dot.com crash. There is also a concern now.
What is immediately evident is that the spread has narrowed dramatically dropping from 2.5% to 1% in 2014. It has plateaued at 1% since the beginning of 2015. I’ll plan to update this chart each month, or sooner, if big changes occur.
At this point, it’s too early to be concerned about yield spread – there are plenty of other issues to worry about.
-Wednesday, the S&P 500 was down about 0.4% to 2060 at the close.
-VIX was down about 1.3% to 15.09.
-The yield on the 10-year Treasury Note fell to 1.85%. The bond ghouls are worried again.
Today’s close on the S&P 500 made a higher low when compared to 1 week ago on the S&P 500. This is usually bullish and fits with my prior call of a short-term, bottom on the S&P 500 last week. There was some late day buying today and that too is bullish. VIX is not signaling a coming correction. All in all though, signals were not particularly strong, so I could be wrong about the market direction; but I still think it goes up from here.
CORRECTION OVER?
Yes; I still think so, but my opinion will change if the market continues down. See Friday’s blog at…
http://navigatethestockmarket.blogspot.com/search?updated-max=2015-03-30T17:06:00-04:00&max-results=7
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 51% at the close Wednesday. (A number above 50% is usually GOOD news for the markets.) New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +38. (It was +76 Tuesday.) The 10-day moving average of change in the spread was -10. In other words, over the last 10-days, on average; the spread has DECREASED by 10-each day.
Internals switched to neutral; on the market 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, the NTSM analysis switched to 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) continues to outperform the S&P 500. Since February it is 4.7% 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 very good for risk-free money.)
