New orders for U.S. factory goods rebounded strongly in June on robust demand for transportation equipment and other goods, a hopeful sign for the struggling manufacturing sector. The Commerce Department said on Tuesday new orders for manufactured goods increased 1.8 percent…” Story at…
http://www.reuters.com/article/2015/08/04/us-usa-economy-idUSKCN0Q91IQ20150804
Q2 EARNINGS EXCERPT FROM FACTSET (FACTSET)
“…With 71% of the companies in the S&P 500 reporting actual results for Q2 to date, the percentage of companies reporting actual EPS above estimates (73%) is equal to the 5-year average...”
“…In terms of revenues, 52% of companies have reported actual sales above estimated sales and 48% have reported actual sales below estimated sales. The percentage of companies reporting sales above estimates is below both the 1-year (57%) average and the 5-year average (57%).”
“…The blended earnings decline for Q2 2015 is -1.3%. If this is the final earnings decline for the quarter, it will mark the first year-over-year decrease in earnings since Q3 2012 (-1.0…”
“…For Q3 2015, 44 companies have issued negative EPS guidance and 18 companies have issued positive EPS guidance.” FACTSET Earnings Insight at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_7.31.15/view
MARKET REPORT / ANALYSIS
- Tuesday, the S&P 500 was down about 0.2% to 2093 at the close.
-VIX was up about 4% to 13.00.
-The yield on the 10-year Treasury rose to 2.21%.
Not long ago, I wrote that investors needn’t worry about the Fosback High Low Logic Index, because new-lows were falling back to reasonable numbers. That has changed recently. Today there were 208 new-lows and 111 new-highs. In a healthy market, both new lows and new highs shouldn’t be large. Norman Fosback noted that the 50-day EMA (exponential moving average) of his index should not exceed 10% and if it did, a crash was suggested. The Index is now at 9.0%, up from 7% just 3-weeks ago. (The Fosback Index tracks the smaller of new-highs or new-lows as a % of stocks traded on the NYSE.) With the S&P 500 falling recently, and a reversal to the downside in New-Highs/New-Low in general, I am starting to get concerned. Could John Hussman, PhD finally be right? It is a scary thought! He has stated many times that the data supports a 50% decline in stock price.
In the near term, the S&P 500 appears to be headed for a test of the 2047 recent low. (The mini head-and-shoulders pattern on the S&P 500 {from 1 July to present} suggests the Index may fall to 2047 or so.) That will be important to watch. The Index could simply bounce up from there to a rosy outlook; or not. We’ll see.
LONG TERM BREADTH
The 50-dMA of stocks advancing on the NYSE was 47.3% Tuesday, up from 47.4% 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% (week of 1 Aug). And in another measure of long-term breadth, only 40% of Stocks on the NYSE are above their 200-day moving average as of Monday – this number is way too small. Unless this improves – markets are going down.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 47% Tuesday vs. 47% yesterday. (A number below 50% is usually BAD news for the markets. Again, New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-97. (It was +99 Friday.)
The 10-day moving average of change in the spread fell to +4, Tuesday. In other words, over the last 10-days, on average; the spread has INCREASED by 10 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.
Tuesday, the NTSM long term indicator is HOLD. Price is positive, because up-moves have outpaced down moves recently. All other long-term indicators remain neutral.
On 13 July, I increased my investments from 30% invested to 50% invested in stocks.
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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.
Sold my position in SSO (2x S&P 500) for a small loss Monday.
