Greece…Stronger Euro…Home Prices…Chicago PMI…Consumer Confidence…Larger Stock Market Selloff Coming

GREECE TO CALL OFF REFERENDUM FOR MORE MONEY (CNBC)
“…a Greek media report has claimed that negotiations might restart between the government and the country's creditors.” Story at…
http://www.cnbc.com/id/102794738
My cmt: Give your money or I’ll shoot myself in the head.  Will this work? Other reports suggested that the Greek proposal had been rejected. Greece missed its payment of 1.5Billion to the IMF Tuesday.
 
STRONGER EURO (CNBC)
"I think the euro's going to get much stronger because they're going to toss the Greeks out," Gartman said. "Now is the time to buy the euro."
http://www.cnbc.com/id/102799177
If it occurs it will hurt European stocks priced in US dollars.
 
HOME PRICES (WSJ)
“The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.2% in the 12 months ended in April, weaker than a 4.3% increase in March.” Story at…
http://www.wsj.com/articles/home-price-growth-flattens-in-april-1435669072
 
CHICAGO PMI (MarketWatch)
“Chicago PMI rose in June but remained under the 50 level, indicating a slight contraction in conditions. That's the fourth month below 50 this year.” Story at…
http://www.marketwatch.com/story/chicago-pmi-climbs-in-june-but-fails-to-cross-50-level-2015-06-30
 
CONSUMER CONFIDENCE (Briefing.com)
“The Conference Board’s Consumer Confidence Index increased to 95.4 in May from a downwardly revised 94.3 (from 95.2) in April. The Briefing.com Consensus expected the index to decrease to 94.0.” Details and charts at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/conf.htm
My cmt: The Present Condition index within consumer confidence was 108.  It was 180 back in year 2000 before the dot.com crash and 140 before the financial crisis of 2007/2008.
 
WE MAY BE STARTING A LARGER SELLOFF - YAMADA (CNBC)
"’I think this might be the beginning of a larger selloff,’ the legendary technical analyst said Monday on CNBC's ‘Trading Nation.’… Looking at the percentage of stocks above their longer-term 200-day moving average, Yamada noted that ‘you can see that the participation in the market has been declining for slightly over two years.’" Story at…
http://www.cnbc.com/id/102797264
 
MARKET REPORT
-Tuesday, the S&P 500 was up about 0.3% to 2063 at the close.
-VIX fell about 3% to 18.23.
-The yield on the 10-year Treasury Note was unchanged at 2.34%.
 
The 50-day value of stocks advancing remained 48%. Simply, that means that less than half of the stocks on the NYSE have been going up over the last 50-days. That is not a good sign.  It hasn’t done that since last October’s 7% mini-correction.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained 46% at the close Tuesday.  (A number below 50% is usually BAD news for the markets. 
 
New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-213 (It was -310 Monday.)  This is a really bad number for an up-day!
 
The 10-day moving average of change in the spread rose to minus-20.  In other words, over the last 10-days, on average; the spread has DECREASED by 20 each day.
 
Internals switched to neutral on the markets, but only because volume increased overall Tuesday, and as a result up-volume was unusually high.

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         
Tuesday, the NTSM long-term analysis remained SELL. PRICE (panic indicator) flashed sell Monday and the VIX indicator remained negative; VOLUME and SENTIMENT indicators remained neutral. All long-term indicators were worse Tuesday.

 

MY INVESTED STOCK POSITION

Tuesday I cut my investments from 50% invested to 30% invested in stocks, all in an S&P 500 index. 
 
I am keeping 30% invested since it assures I will have gains if the market goes up.  On the other hand even in a worst case scenario I would only lose 15% in the unlikely event the market were to be cut in half.
 
Whether this will turn out to be a good move remains to be seen.  I would warn readers that I have underperformed the S&P 500 in recent years so this may be another false alarm.  It is doubtful that this is “the big one” that John Hussman and others have been warning about for several years, but there do seem to be several issues.
 
Greece isn’t the only problem; Puerto Rico‘s Governor said that they cannot pay their $72-billion debt either.  There is likely to be continued worry over other European countries catching the “contagion”.  Further, until Tuesday, I was invested in Europe/Asia and small cap stocks.  It may not be the best time to be holding Euro-Pacific stocks and small-cap stocks will be more volatile than large-cap if this does turn ugly.
                                                                                        
THRIFT SAVINGS PLAN (TSP) MEMBERS
My TSP Allocation: 70%-G; 30%-C. 

Greek Negotiations

GREEK NEGOTIATIONS

CNBC stated that Greek media is reporting that negotiations may get started again.  No news yet.  As I noted earlier, this is impossible to trade so, as covered in the earlier blog, I am simply reducing stock allocations a bit (30% in the stock market instead of 50%) until this mess is sorted out.

Greece...Pending Home sales…John Hussman –Extreme Market…Time to Sell

My summer schedule is often erratic so expect some later posts.
 
GREECE (CNBC)
“Greek Prime Minister Alexis Tsipras…blasted Athens' creditors, whom he accused of conspiring to "wipe out hope," and called for his country to vote "no" in the upcoming referendum.” Story at…
http://www.cnbc.com/id/102790605?trknav=homestack:topnews:2
My cmt: So he wants to create a crisis so Europe will bail them out.  Hmmm. I wonder how that will play out.
 
PENDING HOME SALES (MarketWatch)
“Pending home sales in May rose to their highest level in over nine years, the National Association of Realtors said Monday. The pending home sales index rose 0.9% in May…” More at...

http://www.marketwatch.com/story/pending-home-sales-rise-to-over-nine-year-high-in-may-2015-06-29

 
HUSSMAN EXCERPT (Hussman Funds)
“Investors don’t seem to appreciate what they’ve actually done as a result of the yield-seeking speculation encouraged by the Federal Reserve in recent years…investors have priced equities for zero returns over the coming decade, with the likelihood that by the end of the present market cycle, every bit of total return, every zig and zag of the market since 2000, will be wiped away for naught. Why? Because even the 4.1% annual total return in the S&P 500 since the 2000 market peak has been achieved only by driving market valuation to what is now the second-highest extreme in history, eclipsing every historical record except that 2000 peak, and beyond those of 1929, 1937, 1966, 1973, and 2007. How much of a market loss is needed to wipe away 15 years of 4.1% annual total returns? About 45%...” – John Hussman, PhD, Weekly Market Commentary from Hussman Funds.
http://www.hussmanfunds.com/wmc/wmc150629.htm
 
HIGH VOLUME FRIDAY
This past Friday saw extreme high volume, nearly twice normal.  Turns out it was caused by Russell rebalancing.  Russell Investments rebalanced their benchmarks.  Indexes like the Russell 2000 were rebalanced to delete companies that no longer met the criteria for inclusion in the index and add companies that did.
 
THE BIG MOVE TODAY (Monday)…
…suggests that tomorrow is likely to be an up-day about 62% of the time based on statistical analysis of price-volume.  There was strong late day selling so the Pros don’t like this market either.  The move was so large that it triggered a panic indicator in my system.  Usually, a large move like today that exceeds a standard deviation of “normal” moves by a large amount, suggests further down moves ahead, but there were other indicators that muddy the water. 
 
-Low unchanged volume Monday suggests a bottom or bottom soon.
 
-Only 9% of stocks on the NYSE advanced Monday.  Oddly, that can sometimes be a good signal to buy.  It usually signals a flush-out of weak hands.  With just one huge down-day under our belts, I wouldn’t be a buyer yet, except for perhaps a day-trade.
 
-As of Friday, less than half of all stocks on the NYSE are above their 200-day moving averages.  That’s a bad sign and goes along with the 50-day moving average of stocks advancing on the NYSE reading of 46%.  Anything below 50% is bad news.
 
TIMING THE CORRECTION
Greece is a problem for any market-timer.  If their issues are worked out positively, the correction may end in a flash leaving the market-timer holding the bag.  That’s what happened to me last October during the Ebola crisis.  The market went down for 19-days before a quick rebound. The S&P 500 is already down 26-days since the prior high on 21 May although the “drop from the top” is now only 3.4% as of Monday. The average correction in the 8-20% range has taken about 50-days since 2010.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 46% at the close Monday.  (A number below 50% is usually BAD news for the markets.  
 
New-lows outpaced New-highs Monday. The spread (new-highs minus new-lows) was minus-310 (It was -113 Friday.)  That too is a large number that hasn’t occurred since the lows last December and before that around the lows of Oct 2014.
 
The 10-day moving average of change in the spread fell to minus-24.  In other words, over the last 10-days, on average; the spread has DECREASED by 24 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         
Monday, the NTSM long-term analysis switched to SELL. PRICE (panic indicator) and VIX indicators flashed sell while; VOLUME and SENTIMENT indicators remained neutral.

MY INVESTED STOCK POSITION
I plan to cut my investments from 50% invested to 30% invested Tuesday unless the S&P 500 were to somehow close above 2100, an unlikely scenario. 
 
Whether this will turn out to be a good move remains to be seen.  I would warn readers that I have underperformed the S&P 500 in recent years so this may be another false alarm.  It is doubtful that this is “the big one” that John Hussman and others have been warning about for several years, but there do seem to be several issues.
 
Greece isn’t the only problem; Puerto Rico‘s Governor said that they cannot pay their $72-billion debt either.  There is likely to be continued worry over other European countries catching the “contagion”.  Further, I currently am invested in Europe and it may not be the best time to be holding Euro-Pacific stocks and small-cap stocks will be more volatile than large-cap if this does turn ugly.
                                                                                       
THRIFT SAVINGS PLAN (TSP) MEMBERS
My planned TSP Allocation: 70%-G; 30%-C.  I will keep 30% invested since it assures I will have gains if the market goes up.  On the other hand even in a worst case scenario I would only lose 15% in the unlikely event the market were to be cut in half.

Michigan Sentiment…Thoughts from John Hussman, PhD…Stock Market report…Stock Market Report…TSP Allocation

MICHIGAN SENTIMENT
The final reading of the University of Michigan's consumer sentiment index rose to 96.1 in June. The reading is a five-month high.” Story at…
http://www.businessinsider.com/university-of-michigan-consumer-sentiment-index-june-2015-6
 
HUSSMAN (Hussman Funds)
“The financial markets are establishing an extreme that we expect investors will remember for the remainder of history, joining other memorable peers that include 1906, 1929, 1937, 1966, 1972, 2000 and 2007. The failure to recognize this moment as historic is largely because investors have been urged to believe things that aren’t true, have never been true, and can be demonstrated to be untrue across a century of history.” – John Hussman, PhD. Weekly Market Commentary from Hussman Funds at…
http://www.hussmanfunds.com/wmc/wmc150622.htm
My cmt: I don’t know if John Hussman is right yet; but he will be right, sooner or later.  Based on past history, I suspect sooner. Still, I remain fully invested, but I have eliminated trading positions in the last 2-days.
 
MARKET REPORT
-Friday, the S&P 500 was down a point to 2101 at the close, slightly below the 50-day moving average.
-VIX rose about 0.1% to 14.02, nearly unchanged.
-The yield on the 10-year Treasury Note rose to 2.48%.
 
Market Internals remain negative on the markets. 
 
The 50-day value of stocks advancing remained 48.2%. Simply, that means that less than half of the stocks on the NYSE have been going up over the last 50-days. That is not a good sign.  It hasn’t done that since last October’s 7% mini-correction.
 
Statistical analysis shows that the S&P 500 is very calm with small moves in price-volume.  That often leads to a retreat in the Index, though not necessarily a large one.
 
There was big volume Friday, nearly twice normal volume on the NYSE and 50% above normal for the S&P 500.  Some would suggest this is “distribution” the transfer of stocks to late comers by the Pros with little change in price; others say that a high volume day without much change in price validates the current price and is bullish.  My guess: perhaps traders headed out to the Hamptons for vacation and simply didn’t want to hold stocks next week. I don’t think the high volume, by itself, means much.
 
8% of today’s volume on the NYSE was on issues unchanged in price.  (I think that’s correct. I am using an unfamiliar site for this data today.) This indicates a level of confusion by investors and sometimes precedes a decline.  If it had been higher, say 9 or 10%, I‘d be more worried.
 
I sold the rest of my trading positions Friday.  I had held the QQQ’s since March and sold for a miniscule 0.1% loss.  Again, the market internals looked dreadful with new-lows drastically outpacing new highs.  They had just turned up last week and this reversal to the downside has me concerned.  There is no point in holding trading positions when one is not sure of market direction.  Short-term, I think it will go lower, but internals can always reverse so no point in getting too worked up.
 
SOMETIMES CAUTION IS GOOD
“..the job of a portfolio manager is to participate in the markets with a predilection toward capital preservation. It is the destruction of capital during market declines that have the greatest impact on long-term portfolio performance.” – Lance Roberts
 
I remain in long-term positions.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 49% at the close Friday.  (A number below 50% is usually BAD news for the markets.
 
New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-113 (It was -32 Thursday.)  The 10-day moving average of change in the spread fell to minus-6.  In other words, over the last 10-days, on average; the spread has DECREASED by 6 each day. Internals switched to 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 long-term 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 in the long-term portfolio, mostly in smaller cap-stocks in the long-term portfolio with some international stocks. 50% is conservative, but appropriate for a retiree.  

 

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 4% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 1.1% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My current 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.)

Jobless Claims…Consumer Spending Up…Stock Market Report…TSP Allocation

JOBLESS CLAIMS (Bloomberg)
“Filings for U.S. unemployment benefits held below 300,000 for the 16th straight week, signaling a tighter labor market that will help propel growth in the second half of 2015. Jobless claims rose by 3,000 to 271,000 in the week ended June 20…” Story at…
http://www.bloomberg.com/news/articles/2015-06-25/jobless-claims-in-u-s-hold-below-300-000-for-16th-week
 
CONSUMER SPENDING (WSJ)
“Americans boosted spending in May at the fastest rate in almost six years, the latest sign the economy is rebounding from a brutal winter. Personal spending, which measures what consumers spend on everything from cars to medical care, jumped a seasonally adjusted 0.9% from a month earlier…”  Story at…
http://www.wsj.com/articles/u-s-consumer-spending-soared-in-may-1435235495
 
MARKET REPORT
-Thursday, the S&P 500 was down about 0.3% to 2102 at the close, slightly below the 50-day moving average.
-VIX rose about 6% to 14.01.
-The yield on the 10-year Treasury Note rose to 2.39%.
 
Market Internals deteriorated further and are now negative on the markets. 
 
The 50-day value of stocks advancing is only 48.2%. Simply, that means that less than half of the stocks on the NYSE have been going up over the last 50-days. That is not a good sign.  It hasn’t done that since last October’s 7% mini-correction.
 
Statistical analysis shows that the S&P 500 is very calm with small moves in price-volume.  That often leads to a retreat in the Index, though not necessarily a large one.
 
Relative strength Index (RSI) (14-day, SMA) is in neutral territory so no real news there.  It is troubling that RSI is 53 (neutral) while the Index has retreated back to its lower trend line.  This suggests that the Index could fall a ways before RSI would signal an oversold reversal if it does in fact retreat.
 
This market has me worried for the short term. I didn’t like today’s reversal in market Internals and especially that new-lows exceeded new-highs.  I sold trading positions in IWM (Russell 2000) and UWM (leveraged Russell 2000), for a profit of a bit better than 2%.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 48% 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-32 (It was +28 Wednesday.)  The 10-day moving average of change in the spread fell to minus-5.  In other words, over the last 10-days, on average; the spread has DECREASED by 5 each day. Internals switched to 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 long-term 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 in the long-term portfolio, 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 4.2% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 1.1% ahead of the S&P 500.
 
THRIFT SAVINGS PLAN (TSP) MEMBERS
My current 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.)