“The number of job openings in the U.S. surged to a 14-year high in April in a sign that job growth could strengthen further in coming months, the Labor Department said Tuesday. Employers posted 5.4 million openings in April, up from 5.1 million in March and the most since labor began tracking the figure in 2000…”
http://www.usatoday.com/story/money/2015/06/09/jolts-report-april/28712725/
CASS FREIGHT INDEX SAYS DOW THEORY IS WRONG
Monday, even the WSJ had a front page article on Dow Theory and why it was suggesting a correction or crash. It was all over CNBC too, as they picked up the WSJ story and ran with it, again. It seems impossible to go more than an hour before someone mentions Dow Theory.
The problem is, “It’s bunk.” Dow Theory relies on the transportation stocks to warn that there could be a slow-down in industrials, the original Dow stocks. As the transport stocks fall, it signifies industrial production may be in trouble. That was true 100-years ago when Charles Dow suggested the Dow Theory methodology and it is still true, to a lesser extent, today. The problem now is that the airlines are tossed into the transportation index and they have little to do with industrial production as it relates to the Dow Theory, especially as it was conceived 100-years ago.
But to get to the real point…tonnage has increased for trucks and rail per the CASS Freight Index. As the chart shows below, the CASS Freight Index has been climbing even as the transportation stocks have fallen. The MAY ISM data showed expansion in manufacturing too. Forget the Dow Theory and the Dow-theorists. The market could correct at any time (that’s not a prediction), but if it does, it won’t be because of Dow Theory.
Chart from https://research.stlouisfed.org/fred2/release?rid=280MARKET REPORT
-Tuesday, the S&P 500 was up a point to 2080 at the close.
-VIX fell about 5% to 14.47.
-The yield on the 10-year Treasury Note was up to 2.42%. (As a percentage move, that’s 1.5% higher on the day.)
The Relative Strength Index (RSI-14 day, SMA) finished at 29 today, suggesting an Oversold condition so I’d expect a turn-around to the upside soon, but not necessarily immediately. The S&P 500 is now firmly at its lower trend line on a longer term basis and has little room to fall further without triggering further selling.
In general, NYSE the 10-day, Market-Internals are still suggesting more downside ahead. Still, I am hopeful that this trend will reverse soon. Up-volume is hinting at a reversal today.
The S&P 500 peaked about 3-weeks ago, but it is now only 2.4% off its most recent high.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 44% 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-100 (It was -59 Monday.) The 10-day moving average of change in the spread rose to -6. In other words, over the last 10-days, on average; the spread has decreased by 6 each day.
Internals remain negative on the markets, but up-volume
improved and that is a small hopeful sign.
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 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 3.6% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 1.3% 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.)
