“Personal income and spending rose as expected in July, according to the latest report from the BEA. Income rose 0.4% in July while spending ticked up 0.3%.” Story at…
http://www.businessinsider.com/personal-income-and-spending-august-28-2015-8
PERSONAL INCOME AND SPENDING (Briefing.com)
“Personal spending increased 0.3% for a second consecutive month in July…Personal income and spending hardly moved from June trends.” Details at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/income.htm
CONSUMER CONFIDENCE FALLS (Bloomberg)
“Consumer confidence declined in August to a three-month low as recent
stock-market turbulence weighed on Americans’ outlook for the U.S. economy in
the coming year. The University of Michigan consumer sentiment final index for
the month fell to 91.9 from 93.1 in July.” Story at…
http://www.bloomberg.com/news/articles/2015-08-28/consumer-sentiment-in-u-s-declined-in-august-to-three-month-lowMARKET REPORT / ANALYSIS
-Friday, the S&P 500 was up about 0.1% to 1989 at the close.
-VIX fell about 0.2% to 26.05.
-The yield on the 10-year Treasury remained 2.17%.
The first bounce in the 2011 correction was 3-days long. Friday was the third day and the trading was very choppy with up and down moves all day. Given that the bounce stalled just below the 1999 level (1999 represents a 50% retracement from the recent low) I suspect Monday will lead to more selling. Eventually, this should lead to a retest of the low of 1868 as is the norm during corrections. No guarantee; the markets could run higher, but that is not the most likely scenario.
During the 2011, 19%-correction, it took 1-month from the waterfall bottom (similar to the low 3-days ago) before the markets made a final bottom (slightly lower), so this correction could take a while to resolve with a lot more up and down movement ahead.
This correction also shares an important characteristic with the 2010 correction (down 16% top to bottom). That correction started quickly with an 8% drop in 9-days with 4-straight down days as the S&P 500 recently experienced. It dropped another 8% before it was over 2-months later. We’ve just completed 4-straight down days. In each case, both 2010 and 2015, the last day of the 4-day drop was a “successful test” with lower volume and improving internals; to many traders it signaled a correction end. It wasn’t the end in 2010 and we’ve probably not seen the lows yet either.
The Fed still hangs over the market and I don’t think China is gone by any means.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) was 43% Friday vs. 44% Thursday. (A number below 50% is usually BAD news for the markets. Again, New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-14. (It was -18 Thursday.) There were 7 new-highs Friday.
The 10-day moving average of change in the spread remained +4, Friday. In other words, over the last 10-days, on average; the spread has INCREASED by 4 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
Friday, the NTSM long term indicator was SELL. VIX and Volume indicators are negative. Sentiment and Price are neutral. Friday, there was a “Death Cross” on the S&P 500, signaled when the 50-day moving average (dMA) crosses below the 200-dMA. That is usually a negative signal, but Friday investors paid no attention.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
G-Fund (Cash, risk-free yielding 2.1% over the last 12-months): 70%
C-Fund (S&P 500): 15%
I-Fund (EFA): 15%
At this point, I think the S&P 500 is a buy when it’s below 1890, but I will use technicals to make a final decision. When I do move back into stocks, I will initially invest a high percentage into stocks and phase back if the Index gets to prior highs.
