Personal Spending/Income … Chicago PMI … Michigan Sentiment … NXP Semiconductor Crashes … Stock market Analysis

PERSONAL SPENDING SLOWS – BUT IT ISN’T BAD NEWS (Marketwatch)
“Americans are snapping up new cars and trucks at the fastest rate in a decade, but cheaper gas prices led to the smallest increase in consumer spending in September in eight months. Consumer spending rose a seasonally adjusted 0.1% last month to mark the smallest gain since January…At the same time, though, the government said income growth also slowed. Personal incomes rose just 0.1% in September, the slimmest gain since March.” Story at…
http://www.marketwatch.com/story/consumer-spending-slows-for-a-good-reason-2015-10-30
My cmt: If gas is cheaper, we pay less for gas (duh) and the Personal Spending stat goes down. At least so it would seem.  That doesn’t explain why personal income only rose 0.1% - the same as spending. The is a good-news/bad-news story.
 
CHICAGO PMI (Briefing.com)
“The Chicago PMI increased to 56.2 in October from 48.7 in September.” Charts and commentary at…
http://www.briefing.com/Investor/Calendars/Economic/Releases/chi.htm
My cmt: This is a good number and the trend is now up with higher highs and lower lows.  It’s a regional number so it will be interesting to see if this foreshadows national improvement.
 
MICHIGAN SENTIMENT (Bloomberg)
"Consumer sentiment rose less than forecast in October as Americans viewed buying conditions as less favorable than they did earlier in the month. The University of Michigan’s final index for the month increased to 90 from 87.2 in September.” Story at…
http://www.bloomberg.com/news/articles/2015-10-30/consumer-sentiment-in-u-s-rose-less-than-forecast-in-october
 
NXP SEMICONDUCTORS GOT CREAMED THURSDAY - DOWN 20%
NXPI is 35% off its highs.  NXP provides chips to APPLE and has the technology that enables pay-by-phone at the cash register so it has been a Wall Street darling. They also make chips for cars and other electronics. I am interested because I sold NXPI back in July at a profit at $97.  It is also interesting because the company’s statement hints at broader problems for the economy. Here’s their statement:
"As we entered the third quarter, we noted a weakening of demand as our customers began to communicate concerns with an uncertain economic environment…As the third quarter progressed, our end-customers, across multiple end-markets continued to voice an increased and significant degree of uncertainty around any increase in demand. This has resulted in lower than planned sell-through and an increase of channel inventory. As a result, our guidance for the fourth quarter reflects a much more cautious view of near term sales which may occur during the quarter." A story on this is located at…
http://www.thestreet.com/story/13344469/1/here-s-why-gopro-and-nxp-plunged-today-tech-roundup.html?puc=yahoo&cm_ven=YAHOO
 
MARKET REPORT / ANALYSIS        
-Friday, the S&P 500 was down about 0.5% to 2079 at the close.
-VIX was rose about 3% to 15.07.
-The yield on the 10-year Treasury dropped slightly to 2.15%.
 
This market continues up, but I am committed to waiting for a better buy point.  This may just lead to more missed opportunity, but there is no point in worrying – I’ve become a bear at least for the near term. I’ll post a bit more on this later. The S&P 500 is about 1% above its 200-dMA of 2062.  Let’s see if that can hold.
 
Longer term, I am becoming increasingly concerned about the appearance of the charts, company revenue and earnings weakness, and deterioration in economic conditions. The 50-dMA of Breadth (%-advancing on the NYSE) peaked at 55.8% on 2 March 2015 at the high.  The Index only managed to claw about 1% higher after that peak (in May of 2015), but the 50-dMA had dropped to 52.6% at the new high on the S&P. We need to watch for Breadth improvement or THE TOP may be in.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 50.6% Friday vs. 51.2% Thursday.  (A number above 50% is usually GOOD news for the markets.  On a longer term, the 50-day moving average of advancing stocks rose to 51.7%.  The McClellan Oscillator (a Breadth measure) remained Positive Friday.
 
New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +16. (It was +38 Thursday.)   The 10-day moving average of the change in spread was minus-2 Friday.  In other words, over the last 10-days, on average; the spread has decreased by 2 each day.  The internals switched to neutral on the markets; only Breadth remained positive.

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 BUY. Price, VIX and Volume indicators are positive.  Sentiment is neutral. I am not following this guidance for the time being; I am waiting for a better entry point.

I will wait before increasing stock holdings; I think there will be a better entry point.

 
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%

Unemployment … GDP … Stock Market Top Coming … Stock Market Analysis

UNEMPLOYMENT CLAIMS (Bloomberg)
“Applications for unemployment benefits in the U.S. were little changed last week, hovering close to four-decade lows and showing steady progress in the labor market. Jobless claims increased by 1,000 to 260,000 in the week ended Oct. 24…” Story at…
http://www.bloomberg.com/news/articles/2015-10-29/jobless-claims-in-u-s-were-little-changed-near-four-decade-low
 
GDP (Marketwatch)
“The U.S. economy cooled off in the third quarter as companies cut back production to prevent a worrisome buildup in inventories, particularly of goods destined for foreign markets. Gross domestic product — the value of everything a nation produces — rose at a 1.5% annual pace from July through September…” Story at…
http://www.marketwatch.com/story/third-quarter-gdp-lands-with-thud-just-15-growth-2015-10-29
My cmt: It was 3.9% in the prior quarter. The 1.5% is a preliminary reading. The current prediction by the Atlanta Fed for the FINAL number is 1.1%.
 
TOP COMING (CNBC)
“Market watcher Jeffrey Saut [chief investment strategist at Raymond James], who correctly called the August bottom, said Thursday he sees a "trading top" for stocks in the next few days.” Story/Video at…
http://www.cnbc.com/2015/10/29/i-called-august-bottom-now-i-see-top-jeff-saut.html
 
MARKET REPORT / ANALYSIS        
-Thursday, the S&P 500 was down 1Pt to 2089 at the close.
-VIX was rose about 2% to 14.61.
-The yield on the 10-year Treasury rose to 2.17%. (Bond traders are pricing in a Fed rate rise; it doesn’t appear to be priced into the stock market yet.)
 
The S&P 500 Index was overbought last week on a standard Advance-Decline Ratio basis while the RSI too signaled a possible top.  Both of those indicators have cleared, but another overbought measure is signaling trouble. Wednesday, my price-basis “overbought/oversold” indicator flashed overbought so I have delayed getting back in the market once again. At this point, I am just going to wait it out.
 
Longer term, I am becoming increasingly concerned about the appearance of the charts, company revenue and earnings weakness, and deterioration in economic conditions.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) fell to 51.2% Thursday vs. 55.4% Wednesday.  (A number above 50% is usually GOOD news for the markets.  On a longer term, the 50-day moving average of advancing stocks rose to 51%.  The McClellan Oscillator (a Breadth measure) reversed back to positive Wednesday, but it is nearly negative Thursday.
 
New-highs outpaced New-lows Thursday. The spread (new-highs minus new-lows) was +38. (It was +54 Wednesday.)   The 10-day moving average of the change in spread was +2 Thursday.  In other words, over the last 10-days, on average; the spread has increased by 2 each day.  The internals remained 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 BUY. Price, VIX and Volume indicators are positive.  Sentiment is neutral. I am not following this guidance for the time being; I am waiting for a better entry point.

I will wait before increasing stock holdings; I think there will be a better entry point.

 
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%

FED Signals Rate Increase Moore Likely … Crude Inventories … Bear Market Less Likely … Stock Market Analysis

Let’s eat Grandma.
Let’s eat, Grandma.
Commas save lives.
 
FED MEETING (WSJ)
“Federal Reserve officials on Wednesday kept short-term interest rates unchanged near zero, but they opened the door more explicitly than before to raising rates at their final 2015 meeting in December…Fed officials…pointed specifically to the next meeting as a time when they would be assessing whether it was finally time to raise rates.” Story at…
http://www.wsj.com/articles/fed-holds-rates-near-zero-but-signals-possible-hike-at-its-next-meeting-1446055373
 
CRUDE INVENTORIES
“The U.S. Energy Information Administration (EIA)…[indicated that]…U.S. commercial crude inventories increased by 3.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 480 million barrels.” Story at…
http://247wallst.com/energy-economy/2015/10/28/crude-oil-price-jumps-following-inventory-report/
 
IMPROVING CREDIT CONDITIONS – THE BEAR IS LESS LIKELY (Financial Sense)
“With the impressive rally off the lows the S&P 500 has now managed to make an important break back above its long-term (12-month) moving average. If you’ve been reading my ongoing updates for the better part of this year, you’ll know that this was the third warning sign I was watching for to help gauge the likelihood of a market peak and onset of a major bear market.” - Cris Sheridan. Commentary at…
http://www.financialsense.com/contributors/cris-sheridan/bull-vs-bear-credit-conditions
 
ECONOMIC ACTIVITY CORRELATES TO STOCK PRICES – AND IT AIN’T GOOD
The Hussman chart (shown below) shows falling economic activity as measured with the ISM and Fed Manufacturing Reports. I wanted to correlate that to the stock market, specifically the S&P 500, so I aligned a second chart below the Economic Activity chart and matched the dates.  I have delineated market peaks in red. Generally, the charts show that when the Economic Activity slips into negative territory, it is near a market peak. This suggests that we could be at, or very near, a major market peak now. Note that I am not concerned about when recessions start. The stock market doesn’t always peak at a recession start.  That was the case in 2000 when the market peaked well ahead of the recession. (The scale is a little off on the graphic below. The 2^nd peak of the S&P 500 in October 2007 did closely align with the start of the 2007-2008 recession.)

BONDS DOUBT THE RALLY
“…the broader Russell 2000 Index is barely moving at all, despite the surge in mega-cap stocks. Then there’s the Dow Jones Transportation Average. It remains far below its previous high, which was set all the way back in November 2014. Bottom line? I’ll be the first to admit I was surprised by the magnitude of last week’s rally. But it’s clear bond investors aren’t buying the euphoria yet. Unless and until that changes, I remain wary of risk assets in general … and many stocks in particular.” – Bond Trader
 
MARKET REPORT / ANALYSIS        
-Wednesday, the S&P 500 was UP about 1.2% to 2090 at the close.
-VIX was down about 7% to 14.33.
-The yield on the 10-year Treasury rose to 2.09%.
 
As noted in my recent chart posts, I have become more bearish long-term.  In the meantime, the S&P 500 has powered up, ignoring my bearishness and raising doubts about staying out of the market.  It still seems like the Index should pullback some to retest the August lows, either with a higher-high or lower-low.  What I thought would happen, hasn’t so far.  Still, I am taking a conservative view and sitting out for a bit longer. The Fed has signaled that December may be the month for a rate hike and that may trigger more concern for the bulls.  Let’s see what happens tomorrow.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 55.4% Wednesday vs. 51.6% Tuesday.  (A number above 50% is usually GOOD news for the markets.  On a longer term, the 50-day moving average of advancing stocks rose to 50.7%.  The McClellan Oscillator (a Breadth measure) reversed back to positive Wednesday.
 
In another reversal, New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +54. (It was -17 Tuesday.)   The 10-day moving average of the change in spread was +7 Wednesday.  In other words, over the last 10-days, on average; the spread has increased by 7 each day.  The internals switched to positive on the markets after deteriorating for more than a week.

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         
Wednesday, the NTSM long term indicator was BUY. Price, VIX and Volume indicators are positive.  Sentiment is neutral. I am not following this guidance for the time being, but that will change if the markets continue up.

I will wait before increasing stock holdings; I think there will be a better entry point.

 
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%