“The number of people who applied for U.S. unemployment benefits slid to the lowest level since 1973 in the seven days ended July 18, another sign of strong labor-market conditions. New applications for U.S. unemployment benefits declined by 26,000 to 255,000 in the seven days ended July 18. New claims have been under 300,000 since late February, the longest run in 15 years.” Story at…
http://www.marketwatch.com/story/jobless-claims-plunge-to-lowest-level-since-1973-2015-07-23
LEADING ECONOMIC INDICATORS (Reuters)
The Conference Board said on Thursday that its Leading Economic Index rose 0.6 percent after an upwardly revised 0.8 percent increase in May…’The upward trend in the U.S. LEI…[is]…pointing to continued strength in the economic outlook for the remainder of the year,’ said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board.” Story at…
http://www.reuters.com/article/2015/07/23/us-usa-economy-leading-idUSKCN0PX1Q920150723
SENTIMENT (Chris Ciovacco)
[AII Sentiment Survey and Investor’s Intelligence Surveys analysis shows]…“Stocks Could Surprise Significantly On The Upside In The Next Fifteen Years”, aligns with the sentiment analysis presented here and tells us to keep an open mind about all outcomes.” – Detailed analysis and commentary by Chris Ciovacco on Sentiment at…
http://chrisciovacco.tumblr.com/post/124697035321/what-do-1987-2003-2009-and-2015-have-in-common
This sort of analysis always surprises me. It’s not that the analysis is wrong, the survey numbers do seem to support the author’s premise; it is just so different from what I see average investors are actually doing with their money. When I calculate a 5-day, Sentiment value {bulls/(bulls+bears)} in selected Rydex/Guggenheim, long-short funds, I find sentiment is now 79%-bulls. It was 85%-bulls on 1 July and 85%-bulls is now my Sell signal for this indicator based on a multiple of standard deviations from the mean. In my analysis, Sentiment is extremely high, but the markets still have room to move higher at this point.
MARKET REPORT / ANALYSIS
-Thursday, the S&P 500 was down about 0.6% to 2102 at the close.
-VIX was up about 4% to 12.63.
-The yield on the 10-year Treasury was down to 2.28%.
The S&P 500 is sitting on its 50-day moving average and is about 2% above the 200-dMA (2063). Either is a likely stopping point for this drop in price, but a retest of the recent low of 2047 is always possible. Even though Internals have deteriorated, they are still neutral so the markets remain somewhat confused.
LONG TERM BREADTH
The 50-dMA of advancing stocks remained 48% Thursday. Below 50% is not good. The last time this indicator was below 50% was back in October when the S&P 500 dropped 7%.
I said yesterday that I was optimistic on the markets. Until the internals turn negative or the market drops below the 200-dMA I remain cautiously optimistic for the short term. Longer term we need to see the S&P 500 make new highs and break beyond the 2120-2130 area where the 500 has been stalled for 5-months.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 51% at the close Thursday. (A number above 50% is usually GOOD news for the markets.
Once again, New-lows outpaced New-highs Thursday. The spread (new-highs minus new-lows) was -225. (It was -251 Wednesday.).
The 10-day moving average of change in the spread fell to minus-15 Thursday. In other words, over the last 10-days, on average; the spread has DECREASED by 15 each day. Internals remained neutral 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 indicator is HOLD. All long-term indicators are neutral.
MY INVESTED STOCK POSITION
On 13 July, I increased my investments from 30% invested
to 50% invested in stocks. I spilt stock investments roughly equally between
S&P 500, Euro/pacific ETF (EFA), and the Dow Jones Completion Index (DWCPF)
as noted in an earlier post. TSP ALLOCATION (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.
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 15%
S-Fund (DWCPF): 15%
I-Fund (EFA): 20%
