“Personal spending surged more than expected in April, according to the Commerce Department. Spending rose 1.0% in the last month, above expectations of a 0.7% increase.” Story at…
http://www.businessinsider.com/personal-income-and-spending-april-2016-5
CHICAGO PMI CONTRACTING AGAIN (MarketWatch)
“A measure of Chicago-area economic activity fell in May back into contraction territory, an indication that the manufacturing sector is still sluggish. Chicago PMI fell 1.1 points to 49.3 in May…the lowest level since February…” Story at….
http://www.marketwatch.com/story/chicago-pmi-falls-back-into-contraction-territory-2016-05-31
CONSUMER CONFIDENCE SLIPS (ABC News)
“U.S. consumer confidence fell for a second month in May to the lowest level since November. The Conference Board said Tuesday that its index of consumer confidence slipped to 92.6 last month from 94.7 in April.” Story at…
http://abcnews.go.com/Business/wireStory/us-consumer-confidence-slips-39502553
FACTSET EARNINGS INSIGHT (Factset)
“The blended earnings decline for Q1 2016 is -6.7%. The first quarter marked the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009. It also marked the largest year-over-year decline in earnings since Q3 2009 (-15.7%). Four sectors have reported or are reporting year-over-year growth in earnings, led by the Consumer Discretionary and Telecom Service sectors. Six sectors have reported or are reporting a year-over-year decline in earnings, led by the Energy, Materials, and Financials sectors.” Earnings Insight at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_5.27.16/view
My cmt: As can be seen above, earnings problems are not confined only to the Energy sector.
DOUG SHORT’S BIG FOUR INDICATOR DISCUSSION (Advisor Perspectives)
“There is… a general belief that there are four big indicators that the [NBER Business Cycle Dating Committee] weighs heavily in their cycle [think recessions] identification process. They are: Nonfarm Employment; Industrial Production; Real Retail Sales; Real Personal Income (excluding Transfer Receipts).”
For detailed discussion and analysis see Advisor
Perspectives at…http://www.advisorperspectives.com/dshort/updates/Big-Four-Economic-Indicators-PI
WHAT THE FED HAS WROUGHT (Real Investment Advice)
“It has taken a massive amount of interventions by Central Banks to keep economies afloat globally over the last seven years and there is little evidence suggesting growth is accelerating. In fact, there may be more evidence suggesting quite the opposite. With expectations rising the Fed will further tighten monetary policy in June, the lack of liquidity for the markets may become a much bigger issue not only for investors, but for the economy as a whole. In other words, excessive exuberance may have a high cost to pay.” – Lance Roberts.
“In investing, the man who wins is the man who loses the least.” – Dick Russell. Commentary at…
https://realinvestmentadvice.com/technically-speaking-what-has-the-fed-wrought/
MARKET REPORT / ANALYSIS
-Tuesday, the S&P 500 was down 0.1% 2097.
-VIX rose about 8% to 14.19 near the close. (Who woke up the options boys?They seem worried.)
-The yield on the 10-year Treasury slipped to 1.83%.
I commented last week that “the S&P 500 has moved slightly higher than my sell point last December, so if bullish conditions remain next week, I’ll get back in.” Money Trend indicators turned down Tuesday so I am not tempted yet. Further, there was an important negative signal Friday; the S&P 500 was overbought using the old tried and true Overbought/Oversold Ratio (based on advance decline data).
MONEY TREND & SHORT TERM TRADING
The short-term Money Trend indicator turned down, Tuesday, and that’s bearish. I continue to hold short positions mostly in SH and some in QID in the trading portfolio only. Those will have to go if the market exceeds my pain-target of 2110 on the S&P 500.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 54.6% Tuesday. It was 56.8% Friday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks slipped to 51.6%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) was down slightly, but remained positive – a neutral indicator in the short-term.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +103 Tuesday. (It was +76 Friday).
The 10-day moving average of the change in spread remained minus-5. In other words, over the last 10-days, on average; the spread has decreased by 5 each day. Market Internals switched to neutral.
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.
Tuesday, the Volume, VIX & Sentiment indicators were all neutral. The Price indicator (measuring the size of up vs down moves) was positive. The long-term NTSM indicator remains HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONOn 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP) and on 15 Jan I reduced stock allocation to zero in long-term accounts. If the S&P 500 index closes above 2110, I plan to add to my stock allocation.
The S&P 500 peaked in Mid-May 2015 and has not been able to break higher in the past 12-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html
