Housing starts in July ran at a seasonally adjusted annual rate of 1.206 million, up 0.2% from an upwardly revised 1.204 million rate (from 1.174 mln) in June… Construction trends have recovered following the unusually cold winter and are back on their late 2014 accelerated pace.” Charts and commentary at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/starts.htm
MARKET REPORT / ANALYSIS
-Tuesday, the S&P 500 was down about 0.25% to 2097 at the close.
-VIX was up about 6% to 13.81.
-The yield on the 10-year Treasury rose to 2.2%.
I was hoping for a bit of a bounce Tuesday, but that was not the case. All we got was more, mostly-directionless, drifting up and down.
I still suspect the market will make it back to prior highs – after that, it’s anybody’s guess. I am short-term bullish, but long term bearish; but to be clear, long term the indicators are neutral.
LONG TERM BREADTH – STILL NEGATIVE, BUT IMPROVED
The 50-dMA of stocks advancing on the NYSE rose to 48.7% Tuesday, from 48.6% Monday. 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.
Stocks on the NYSE that are above their 200-day moving average improved to 41% as of Monday – this number is way too small. Unless this continues to improve – markets are going down. (The average is 64%.) All we can do here is to watch this number and see if it improves and by how much. A correction hasn’t been avoided yet.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 49.5% Tuesday vs. 51% Monday. (A number above 50% is usually GOOD news for the markets. Again, New-lows outpaced New-highs Tuesday. The spread (new-highs minus new-lows) was minus-77. (It was -51 Monday.)
The 10-day moving average of change in the spread rose to +2, Tuesday. In other words, over the last 10-days, on average; the spread has INCREASED by 2 each day. Internals switched to 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
Tuesday, the NTSM long term indicator is HOLD. Indicators haven’t changed in a while. Price is positive, because up-moves have outpaced down moves recently. All other long-term indicators remain neutral.
MY INVESTED STOCK POSITION:
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.
