FED Holds Rates Steady at zero … Jobless Claims … Philadelphia Fed Report … Stock Market Analysis

FED KEEPS RATES STEADY (Marketwatch)
“The Federal Reserve on Thursday held interest rates steady on Thursday due to global headwinds that could slow the economy and keep inflation subdued as the central bank kept alive the possibility of a hike before the end of the year … the Fed said “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.” Story at…
http://www.marketwatch.com/story/federal-reserve-opts-to-keep-interest-rates-near-zero-2015-09-17
In her press conference Yellen said the Committee wants the economy to get to a point where the Committee can be reasonable certain that inflation will hit their target of 2% over the medium-term.  It sounds like the FED will raise in late 2015 or early 2016 assuming the economy doesn’t fall off a cliff.
My cmt: We’ll need to watch oil prices.  A rise will push inflation higher and the Fed will be more likely to move. 
 
JOBLESS CLAIMS (Reuters)
The number of Americans filing new applications for unemployment benefits fell last week to the lowest level in eight weeks, suggesting the labor market continued to strengthen despite the recent tightening in financial market conditions.” Story at…
http://www.reuters.com/article/2015/09/17/us-usa-economy-idUSKCN0RH1NK20150917
 
PHILADELPHIA FED REPORT DOWN (MarketWatch)
“The Philadelphia Fed manufacturing index took a surprise turn into negative territory in September, falling to negative 6 from positive 8.3 in August… “In short, while manufacturers are undoubtedly suffering from the rollover in oil firms’ capex and the strong dollar, the sector is not in meltdown, and it likely is in much less bad shape than the Philly headline seems to suggest,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.” Story at….
http://www.marketwatch.com/story/stock-market-volatility-blamed-for-philly-fed-dive-2015-09-17
 
MARKET REPORT / ANALYSIS        
-Thursday, the S&P 500 was up until the Fed announcement; the Index dropped late in the day and settled down about 0.3% to 1990 at the close.
-VIX fell about 1% to 21.14.
-The yield on the 10-year Treasury fell to 2.22%.
 
The S&P 500 traded around the 50% retracement level today (halfway between the all-time high and the August low) of 1999 and that’s about where a bounce would be expected to fail.  I’ll just have to watch and see.
 
Sentiment remains high measured with Rydex/Guggenheim long/short mutual funds.  As of Wednesday 82-days after the all-time high on the S&P 500, the sentiment value was 59%-bulls (bulls/{bulls+bears}) on a 5-dMA basis.
 
The Death Cross remains in effect since the 50-dMA is below the 200-dMA for the S&P 500. This is a long term signal for many.  In 2011, the Death cross occurred about 7% before the low.  In 2010, the Death Cross first occurred at the low so it was not a good signal then. 
 
As VIX falls, Breadth improves, Sentiment remains high and Market Internals continue up, one must wonder whether there will be a retest of the prior low.  History says the higher probability is that there will be a retest, but only time will tell.   
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) slipped to 54% Thursday vs. 55% Wednesday.  (A number above 50% is usually GOOD news for the markets.  On a longer term, the 50-day moving average of advancing stock was 49.4%.  That’s remains a negative.
 
In a positive reversal New-highs outpaced New-lows Thursday. The spread (new-highs minus new-lows) was +17. (It was -19 Wednesday.)   The 10-day moving average of change in the spread rose to +8 Thursday.  In other words, over the last 10-days, on average; the spread has INCREASED by 8 each day.  The internals switched to positive 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 was HOLD. Sentiment, Volume and Price indicators are all neutral. VIX is negative.

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%
 
This is a conservative allocation.  The number one priority now is return of capital; not return on capital.
 
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.