“The U.S. nonmanufacturing sector lost some momentum in May, according to data released Wednesday by the Institute for Supply Management. But troubles in the mining sector may have contributed to the slowdown. The ISM’s nonmanufacturing purchasing managers index came in at a 12-month low of 55.7 in May…” Story at…
http://www.wsj.com/articles/ism-nonmanufacturing-index-eases-in-may-1433341436
CRUDE INVENTORIES FALL – SO DO PRICES (Bloomberg)
“Crude oil fell the most in a week after Iran told fellow OPEC members they should anticipate more supply from the Middle East nation once sanctions are lifted…’OPEC is overproducing,’ said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. ‘They are maintaining the global surplus.’” Story at…
http://www.bloomberg.com/news/articles/2015-06-03/oil-slumps-most-in-week-as-industry-meets-before-opec-convenes
ADP NATIONAL EMPLOYMENT REPORT (ADP)
“Private-sector employment increased by 201,000 from April to May, on a seasonally adjusted basis.” Press release at…
http://www.adpemploymentreport.com/2015/May/NER/NER-May-2015.aspx
NORM FOSBACK HI/LO LOGIC INDICATOR
I spelled Fosback incorrectly yesterday, but John Hussman, PhD and I were writing about the same individual. To be clear: the Fosback Hi/Lo Logic Indicator is not currently issuing a sell signal based on its 50-day EMA as Fosback suggested in his book, Stock Market Logic. Hussman used a longer moving average in his analysis and that may or may not produce better results. Since the shorter EMA I use is giving a less bearish indication than the long term result, one can conclude that the Hi/Lo Login Indicator is improving, i.e., showing less bearish results at present. In fact, using the 50-dEMA, it is neutral.
MARKET REPORT
-Wednesday, the S&P 500 was up about 0.2% to 2114 at the close.
-VIX fell about 4% to 13.66.
-The yield on the 10-year Treasury Note exploded up to 2.37%. (As a percentage move, that’s 4% higher in a day. That’s a big move for bond yields.)
ASCENDING TRIANGLE – GENERALLY BULLISH
If the upper dashed line were sloping up, one could argue
that the above pattern (signified by the dashed redlines) is a bearish
ascending wedge. Since the upper trend
line is flat, I suggest it is a bullish triangle or at least a neutral
pattern. I remain bullish.
While the S&P 500 stalled, the Utilities have been getting killed due to the increasing bond yields. Just look at DTE Energy (a Midwest utility), it is down 8% relative to the index since February. If the markets were breaking down, one would expect utilities to do well. Since they aren't, I think a continued melt-up for the S&P 500 is more likely than a sell-off.
The bond rout may be good for the stock market. Those selling bonds are likely to invest somewhere. My guess - stocks.
Another good sign, the Russell 2000 (small cap stocks) handily outperformed the S&P 500 Wednesday. The Russell was up 1% Wednesday. The smaller cap stocks appear to be regaining leadership and should lead stock markets higher.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 47% at the close Wednesday. (A number below 50% is usually BAD news for the markets. New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +47 (It was +16 Tuesday.) The 10-day moving average of change in the spread slipped to -3. In other words, over the last 10-days, on average; the spread has decreased by 3 each day. Internals remain negative on the markets, but they improved significantly today.
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 3.1% 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 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.)
