“U.S. consumer sentiment slipped this month but remains at healthy levels, the University of Michigan said Friday. Michigan's index of consumer sentiment fell to 93.1 in July from 96.1 the previous month.” Story at…
http://www.usnews.com/news/business/articles/2015/07/31/university-of-michigan-consumer-sentiment-dips-this-month
CHICAGO PMI (CNBC)
“Business activity in the U.S. Midwest jumped to a six-month high in July, topping economists' forecasts and showing expansion in the region for the first time since April…The Chicago Business Barometer for July was 54.7, according to the MNI Chicago Report.” Story at…
http://www.cnbc.com/2015/07/31/chicago-pmi-in-july-2015.html
MARKET REPORT / ANALYSIS
-Friday, the S&P 500 was down about 0.2% to 2104 at the close.
-VIX was down about 3% to 12.13.
-The yield on the 10-year Treasury dropped to 2.21%.
Improving Market Internals suggests a return to risk-on and further advances in the stock markets. It remains to be seen whether Sentiment and VIX will move enough to make new highs more likely. The low VIX and high Sentiment are suggesting that the S&P 500 won’t make new highs anytime soon; but, those indicators can improve “allowing” the markets to go higher. The S&P 500 is only about 1.3% below its all-time high.
The Shanghai Composite was down another 1.1% yesterday, but it is testing prior recent lows. That could make a world of difference for U.S. stocks if the Shanghai moves up from here.
Volume was huge today, mostly in the last hour of trading. I suppose the Mutual Funds, Indexes and ETF’s were making adjustments. It made for an odd day since fully 63% of all stocks on the NYSE were up, but the S&P 500 was down 0.2%. Normally, I’d guess Monday would be an up-day since the Index will sometimes play catch-up when most stocks are moving up and the Index is moving down - This time? I’m not sure since the volume was unusual.
LONG TERM BREADTH
The 50-dMA of stocks advancing on the NYSE was 47.5% Friday, up from 47.3% yesterday. Below 50% is not good; it simply means that more than half of the stocks on the NYSE have gone down over the past 2-1/2 months. Further, I read a surprising fact on CNBC that over half of the stocks in the S&P 500 are down over 10%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 46% Friday vs. 43% yesterday. (A number below 50% is usually BAD news for the markets. New-highs outpaced New-lows Friday (good news!). The spread (new-highs minus new-lows) was +49, a huge improvement from just a few days ago. (It was +9 Thursday and much worse earlier in the week.)
The 10-day moving average of change in the spread rose to +18, Friday. In other words, over the last 10-days, on average; the spread has INCREASED by 1 each day. Internals remained neutral on the markets and again, 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
Friday, the NTSM long term indicator is HOLD. All long-term indicators remain neutral.
MY INVESTED STOCK POSITION
On 13 July, I increased my investments from 30% invested to 50% invested in stocks.
NEW TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION FOR FRIDAY 31 JULY
The allocation below is a flight to safety – sticking with large caps and international stocks.
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 25%
I-Fund (EFA): 25%
(This is a conservative position most appropriate for retirees or conservative investors.) I think all investors would be well served to cut their stock investments to a lower than normal (for each individual) allocation. Until longer term technicals look better, the old adage that one’s stock allocation should equal your age subtracted from 100 seems reasonable. (40years old: 100-40 = 60% in stocks) 50% would be the lowest stock allocation unless conditions deteriorate.
I did take a small position in the ETF, SSO (2x S&P 500) Thursday, but after looking at the final numbers Thursday night, I am far from confident that trade will pan out.
