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 2nd 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%
