I compare the Industrial Select SPDR ETF (XLI), a basket
of cyclical industrial stocks, to the S&P 500 to gauge investor concerns
over recession. Like DOW theory, the assumption
is that the cyclical stocks in the XLI will underperform the S&P 500 if
investors are concerned about the economy.
Until Thursday, the XLI was underperforming the S&P 500 on every
time scale. As of Monday at the close, XLI
is slightly outperforming the S&P 500. While investors have gotten more
optimistic, it will be interesting to see what happens in the next few
days. Right now there is no strong
signal; that would change if the XLI falls from here.
FACTSET EARNINGS REPORT (Factset)
- “Of the 24 companies that have reported earnings to date for Q1 2015, 20 have reported earnings above the mean estimate and 12 have reported sales above the mean estimate….”
- “At this point in time, 101 companies in the index have issued EPS guidance for Q1 2015. Of these 101 companies, 85 have issued negative EPS guidance and 16 have issued positive EPS guidance. If 16 is the final number for the quarter, it will mark the lowest number of S&P 500 companies issuing positive EPS guidance for a quarter since Q1 2006 (13), when FactSet first began tracking this metric. The percentage of companies issuing negative EPS guidance to date for the first quarter is 84% (85 out of 101). This percentage is well above the 5-year average of 69%.”
- “For Q115, year-over-year earnings for the S&P 500 are projected to decline by 4.8%. If the index reports a year-over-year decline for the quarter, it will be the first time since Q3 2012 (-1.0%)…” Earnings report from Factset at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.10.15/view
It's all about earnings now.
MARKET REPORT
- Monday, the S&P 500 was down about 0.5% to 2092 at the close. The Index peaked about 1030 and fell the rest of the day.
-VIX was up about 11% to 13.94. That’s a big move for only a 0.5% drop in the Index. The last time the VIX popped more than 11%, the index was down 1.5%.
-The yield on the 10-year Treasury Note slipped slightly to 1.93%.
Sentiment (%-bulls in Rydex/Guggenheim long/short funds) continues to fall implying the markets can go higher. There is an alternate interpretation of the falling sentiment. Sentiment peaks after a top; perhaps the top was 2117 on 2 March? Maybe, but other indicators look bullish.
RSI is quite tame suggesting further advance in the S&P 500. Market internals remain good too. The big pop in VIX appears to be a fake-out. I think the market continues up further from here, at least to make a new high.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 56% 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 +100. (It was +113 Friday.) The 10-day moving average of change in the spread was +8. In other words, over the last 10-days, on average; the spread has INCREASED by 8-each day.
Internals remained Positive on the markets Monday.
NTSM
Monday, 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 1 February it is 4.3% 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.)
