“U.S. gross domestic product contracted at a 0.7% seasonally adjusted annual rate in the opening months of the year, a significant downward revision from an initial estimate of 0.2% growth. This marks the third time since the recession ended that the official measure of GDP fell into negative territory.” Story at…
http://blogs.wsj.com/briefly/2015/05/29/why-u-s-gdp-shrank-at-a-glance/
My cmt: This wasn’t a surprise and was widely expected by economists.
CHICAGO PMI (Morningstar.com)
“An economic yardstick for the manufacturing-heavy U.S. Midwest saw growth slip into contraction in May, casting doubt on a widely expected bounceback for the U.S. economy in the second quarter. The Chicago Business Barometer, commonly known as the Chicago PMI, shrank to 46.2 this month from 52.3 in the prior one.” Story at…
http://news.morningstar.com/all/dow-jones/us-markets/201505296829/chicago-pmi-swings-to-contraction-in-may.aspx
STOCKS ARE CHEAP – HERE’S WHY (CNBC)
"When people say 'Oh, well stocks look cheap or expensive compared to history,' it doesn't mean anything," said Golub, chief U.S. market strategist at RBC Capital Markets. The fact of the matter is, the value of stocks has to be compared to other options the investors may choose from…"When you have a 10-year bond yield at 2.2 percent, you should have a valuation of stocks with a P/E over 20," he said. The math here is strikingly simple. Golub values the market simply by dividing S&P 500 earnings by the average yield on Baa-rated corporate bonds—currently around 4.7 percent. By dividing 1 by 0.047, Golub arrives at his "justified" earnings multiplier of 21.” Story at…
http://www.cnbc.com/id/102718012
My cmt: I refer you back to Liz Ann Sonders excellent discussion of PE values at…
http://www.advisorperspectives.com/commentaries/20150519-charles-schwab-devil-inside-dissecting-the-most-popular-valuation-metrics
MICHIGAN SENTIMENT FALLS (Fox News)
“The University of Michigan says its index of consumer sentiment dropped to 90.7 from 95.9 in April. The May reading was the lowest since November. Consumers of all ages and income levels were gloomier this month.” Story at…
http://www.myfoxchicago.com/story/29188979/us-consumer-sentiment-drops-in-may
STOCK MARKET SENTIMENT: I measure sentiment using a 5-day moving average of funds invested in selected Rydex/Guggenheim funds calculated as {bulls/(Bulls+bears)} . Sentiment was higher again Thursday (data is a day late) and is close to giving a sell indication. Sentiment alone won’t trigger a sell; in addition to sentiment, it will take one or more indicators to give a true sell signal.
MARKET REPORT
-Friday, the S&P 500 was down about 0.6% to 2107 at the close.
-VIX rose about 4% to 13.84.
-The yield on the 10-year Treasury Note inched dipped to 2.12%.
-Market action. The S&P 500 tested 2105 a couple times Friday and finally closed about 2pts higher at 2017. 2105 is about where the lower trend line is now so it is good to see that support level hold. (The value associated with the lower trend-line changes as the trend-line rises; it is also somewhat subjective where one draws the line.)
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 47% at the close Friday. (A number below 50% is usually BAD news for the markets. In a negative reversal, New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-5. (It was +8 Thursday.) The 10-day moving average of change in the spread fell to -8. In other words, over the last 10-days, on average; the spread has decreased by 8 each day.
Internals are now 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
Friday, 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 2.7% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 2.4% ahead of the S&P 500.
THRIFT SAVINGS PLAN (TSP) MEMBERS
My new TSP Allocation: 50%-G; 10%-C; 20%-S; 20%-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.)
