Crude Inventories…FOMC (FED) Minutes…Valuations

CRUDE INVENTORIES (24/7 Wall Street)
“U.S. commercial crude inventories decreased by 2.7 million barrels last week, maintaining a total U.S. commercial crude inventory of 482.2 million barrels. The inventory remains at its highest level for this time of year in at least 80 years…On Monday, analysts at Goldman Sachs said that the price for a barrel of West Texas Intermediate (WTI) crude oil could slump to $45 by October.” Story at…
http://247wallst.com/energy-economy/2015/05/20/crude-oil-inventory-decline-smaller-than-expected/
 
FED MINUTES – JUNE FED HIKE NOT LIKELY (NY Times)
“Economic weakness in the early months of the year has persuaded most Federal Reserve officials that June is probably too soon to start raising the Fed’s benchmark interest rate. But they are not planning to wait much longer…Surveys of analysts show that most believe the Fed will start raising rates in September.” Story at…
http://www.nytimes.com/2015/05/21/business/economy/federal-reserve-meeting-minutes.html?_r=0

VALUATIONS (Liz Ann Sonders at Advisor Perspectives)

“Yale professor and Nobel Laureate Robert Shiller defines the numerator of the CAPE [Cyclically Adjusted PE or PE 10] as the real (inflation-adjusted) price level of the S&P 500 Index, and the denominator as the moving average of the preceding 10 years of S&P 500 real reported earnings. …The CAPE is a great tool to keep in the valuation toolbox when judging the likely long-term returns for the stock market. But where it can fall short is as a shorter-term market timing tool; especially by investors following it dogmatically… With yields now moving higher, companies will require stronger earnings growth to support current stretched valuations. This is one of the reasons we are more cautious on US stocks this year relative to most of the past six years.” - Liz Ann Sonders. Interesting commentary on several valuation metrics at…
http://www.advisorperspectives.com/commentaries/20150519-charles-schwab-devil-inside-dissecting-the-most-popular-valuation-metrics
My cmt: Ms. Sonders did say that valuations were stretched relative to bond yields. She discussed the CAPE at length and is not a fan of using it for short-term investment decisions.
 
MARKET REPORT
-Wednesday, the S&P 500 was down about 0.1% to 2126 at the close.
-VIX was up about 0.2% to 12.88.
-The yield on the 10-year Treasury Note slipped to 2.26%. 
 
Once again the S&P 500 was slightly down when there were more advancers than decliners on the NYSE.  52% of stocks on the NYSE were up today (ignoring unchanged shares), not a huge number, but the S&P 500 frequently plays catch-up to the NYSE when this type of imbalance occurs.  Tomorrow is slightly more likely to be up than down.
 
There was some late day selling today so not everyone agrees.
 
There have been only 47-up days in the last 5-months and that is a low number that suggests further upside in a Bull market. For the time being, we are still in a bull-market and I'm guessing the markets will go up for the next few months.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 56% 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 +78. (It was +80 Tuesday.)  The 10-day moving average of change in the spread rose to +13.  In other words, over the last 10-days, on average; the spread has increased by 13 each day.
Internals remained positive 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. 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, mostly 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) remains ahead of the S&P 500.  Since 1 February it is 2.6% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 3.5% 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.)