“Fewer Americans than forecast filed applications for unemployment benefits last week, dropping the average over the past month to the lowest in 15 years, indicating companies are holding on to workers. Jobless claims increased by 3,000 to 265,000 in the week ended May 2…” Story at…
http://www.bloomberg.com/news/articles/2015-05-07/jobless-claims-in-u-s-hover-around-lowest-levels-in-15-years
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.
The spread narrowed dramatically in 2014 and early 2015, but recently it has been climbing and now stands around 1.4%. That is far from a negative number (below the green line on the below chart) that would indicate an inverted yield curve. Bond yields are not suggesting a recession.
MARKET REPORT
-Thursday, the S&P 500 was up about 0.4% to 2088 at the close.
-VIX was down about 0.1% to 15.13. The Options Boys aren’t convinced there isn’t more trouble ahead.
-The yield on the 10-year Treasury Note fell to 2.18%.
As suggested yesterday, the Index did bounce up today, Thursday. I’d like to see it continue up. I won’t feel comfortable until the Index can climb a couple of percent higher. Still, up is better than down so I can’t complain about today’s action.
The trend in market internals remains down and that is not a good sign. There was also some late day selling and VIX didn’t come down much on today’s up-day. The Pros are expecting some more selling.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 44% at the close Thursday. (A number below 50% is usually BAD news for the markets.) New-lows outpaced New-highs Thursday. The spread (new-highs minus new-lows) was minus-31. (It was -55 Wednesday.) The 10-day moving average of change in the spread fell to minus-14. In other words, over the last 10-days, on average; the spread has fallen by 14 each day.
Internals remained 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
Thursday, 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, 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) continues to outperform the S&P 500. Since 1 February it is 2.1% 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 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.)
