ISM Services … Another Bear Market Indicator … Looks Like Topping … Valuation vs. Treasury Yield … Stock Market Analysis

ISM SERVICES UP (MarketWatch)
“The Institute for Supply Management's services index rose to a reading of 59.1% in October, up from 56.9% in September, the highest level in three months…”
http://www.marketwatch.com/story/ism-services-index-climbs-and-tops-forecast-in-october-2015-11-04
 
ANOTHER BEAR MARKET INDICATOR
At the 1929 top, only 2% of stocks on the NYSE made new highs (according to Lowry Research). At the recent 21 May 2015 top, only 2.5% of stocks made new highs.  (Caveat: I am using 2800 as the number of stocks currently traded on the NYSE; there are more issues traded on the NYSE, but they are not all stocks. This stat could actually be worse than 2.5%.) At the top in December 2014, 9% of stocks on the NYSE made new-highs so fewer stocks are participating in this aging bull-market.  This strongly suggests that a Bear Market is approaching. The folks at Lowry Research indicate that new-highs break lower 6-months to 1-year before a final top and somewhat longer if the bull phase has been extended. New-highs (on a 5-day basis) peaked in Jan of 2013.  More recently, a near-term peak was made in early February 2015, 9-months ago.  By this measure we are close to a bear market start. 
 
LOOKS LIKE TOPPING – NOT A BULL MARKET RALLY (StreetTalk)
“With price action still confirming relative weakness, and the recent rally primarily focused in the largest capitalization based companies, the action remains more reminiscent of a market topping process than the beginning of a new leg of the bull market…the current "topping process," when combined with underlying "sell signals," is very different than the action witnessed in 2011… Importantly, while the "always bullish" media tends to dismiss warning signs as "just being bearish," historically such unheeded warnings have ended badly for individuals. It is my suspicion that this time will likely not be much different, the challenge will just be knowing when to leave the "party." – Lance Roberts. Commentary and charts at…
http://streettalklive.com/index.php/blog.html?id=2964
 
Perhaps bear market signals are meaningless…
VALUATION VS TREASURY YIELD – UNCHARTED TERRITORY (Advisor Perspectives)
“Despite the end of QE, many analysts assume that Fed intervention through its Zero Interest Rate Policy (ZIRP), will keep yields in the basement for a prolonged period, thus continuing to promote a risk-on skew to investment strategies despite weak fundamentals. On the other hand, we could see a negative market reaction to a growing sense that Fed intervention may have its downside, resulting in an aberrant bond market and increased inflation/deflation risk.” – Jill Mislinski. Posted at…
http://www.advisorperspectives.com/dshort/updates/Market-Valuation-Inflation-and-10-Year-Yields.php
My cmt: Yes, it’s still a FED driven market, but when it turns, it may turn fast.
 
MARKET REPORT / ANALYSIS        
-Wednesday, the S&P 500 was down about 0.4% to 2102 at the close.
-VIX was rose about 7% to 15.51.
-The yield on the 10-year Treasury rose to 2.23%.
 
I think my “Another Bear Market Indicator” above says it all.  For now, I suspect the markets will pullback 5% or so. There have been a couple of topping indicators recently (overbought, late-day selling). We’ll see.
 
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 55% Wednesday vs. 53.9% Tuesday.  (A number above 50% is usually GOOD news for the markets.  On a longer term, the 50-day moving average of advancing stocks dipped to 54.1%.  The 100-dMA of advancing stocks is 50%. The McClellan Oscillator (a Breadth measure) remained positive Wednesday.
 
New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +61. (It was +83 Tuesday.)   The 10-day moving average of the change in spread was +3 Wednesday.  In other words, over the last 10-days, on average; the spread has increased by 3 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         
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; I am waiting for a better entry point. I am getting tired of repeating this, but a pullback may be in the works.

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%