“Builders are stepping up home construction broadly across the U.S., suggesting the housing market will help anchor the economy amid global turbulence and a likely rise in interest rates…Building permits—a bellwether for construction in coming months—climbed 11% in November…[and]…are up 13.4% this year compared with last.” Story at…
http://www.wsj.com/articles/u-s-housing-starts-surge-10-5-in-november-1450273007
INDUSTRIAL PRODUCTION (CNBC)
“U.S. industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply, a sign of weakness that could moderate fourth-quarter growth.” Story at…
http://www.cnbc.com/2015/12/16/us-industrial-production-nov-2015.html
I wouldn’t get too worked up over this since the drop in utilities is probably tied to warm weather.
FOMC RATE DECISION (Money CNN)
“The Federal Reserve raised its key interest rate on Wednesday from a range of 0% to 0.25% to a range of 0.25% to 0.5%... Investors were pleased to see that the Fed expects "only gradual increases" in rates next year and that the committee explicitly said it would take into account "readings on financial and international developments." Story at…
http://money.cnn.com/2015/12/16/news/economy/federal-reserve-interest-rate-hike/index.html?iid=surge-toplead-dom
MARKET REPORT / ANALYSIS
-Wednesday, the S&P 500 was up about 1.5% to 2073 at the close.
-VIX fell about 15% to 17.86.
-The yield on the 10-year Treasury rose to 2.29.
Up-Volume did indeed break above targets today suggesting that the correction is truly over and no further “testing” of prior lows would be expected in the near term. As a result, I will be increasing my stock investments substantially. These volume indicators are new to my arsenal, although I suspect they are well known to Wall Street technicians.
This is not an all-clear forever, though; we know that the S&P 500 is now only about 2.5% below all-time highs, so one wonders whether the Index can break substantially higher. I don’t know, and anyone who claims to know is guessing. All I know is that signals are now suggesting that the Index is likely to advance.
The Index broke above both its 200-dMA and the 50-dMA. These were resistance levels so the push thru them is another bullish sign. The Advance/Decline Ratio remains oversold another bullish indicator.
Further, VIX has fallen substantially and is now neutral in the NTSM Long-term indicator; and my modified on-balance-volume (OBV) indicator has also flipped to neutral.
Last, I have also devised a new way of looking at Market Internals versus the S&P 500 Index and that is an interesting short-term indicator. It is currently pointing up and is giving signals in advance of the Market Internal short-term indicator I have been reporting for a while. I will probably switch to it at some point. That’s bullish too.
I am guessing that I will maintain this bullish stance for only about a month or so, but I could easily bailout sooner if short-term indicators don’t continue to improve.
Be sure your stock allocation is low enough to allow a good night’s sleep.
MARKET INTERNALS (NYSE DATA)
(I am getting data from various sites. Some of the numbers are subject to minor revision later today so the previous day’s numbers may be slightly different than reported previously.)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 41.1% Tuesday vs. 35.1% Tuesday. (A number below 50% is usually BAD news for the markets. On a longer term, the 150-day moving average of advancing stocks remained 48.7%. A value below 50% indicates a down trend.
The McClellan Oscillator (a Breadth measure) remained negative Wednesday, but it improved substantially and is now just barely negative.
New-lows outpaced New-highs Wednesday. The spread (new-highs minus new-lows) was minus-70. (It was -168 Tuesday.) The 10-day moving average of the change in spread was -2 Wednesday. In other words, over the last 10-days, on average; the spread has decreased by 2 each day. Market Internals remain neutral Wednesday, but are trending upward. They were so bad that this indicator may take a while to improve.
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 Price indicator is positive. Sentiment, VIX & Volume are neutral. I am putting on a BUY signal because I ignored prior buy-signals and conditions are now technically more positive.
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
Tomorrow I will increase my invested position in my retirement account to 50% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). Stay with the highest quality stocks – my recommendation is to avoid small or mid-caps at this time.
I may not maintain a bullish stance for long; I’ll just see what the indicators have to say.
