“With 25% of the companies in the S&P 500 reporting earnings to date for Q2 2016, 68% have reported earnings above the mean estimate and 57% have reported sales above the mean estimate...For Q2 2016, the blended earnings decline is -3.7%...For Q3 2016, 14 companies have issued negative EPS guidance and 5 companies have issued positive EPS guidance….Forward P/E Ratio is 17.0, above the 10-Year Average (14.3)”. – Earnings Insight from Factset.
My cmt: The estimate just 3-weeks ago was a 5.7% decline in earnings. This improvement to -3.7% (as far as it goes) is one reason why the market is doing better.
Today’s report reads like yesterday because not much has changed; the markets are bouncing back and forth
MARKET REPORT / ANALYSIS
- Friday the S&P 500 up about 0.5% to 2175.
-VIX rose about 6% to 12.02.
-The yield on the 10-year Treasury was up slightly to 1.57%.
Volume was low again about 20% below the monthly average so there has been little conviction associated with this rally.
Friday’s value of RSI was 78, just short of the “overbought” indication of 80. The S&P 500 also remains “overbought” when using the old stand-by Advance-Decline Ratio.
I’m still guessing we see a pullback in the 4-5% range; the timing has surprised me since I expected a pullback before now. I remain Bullish in the intermediate term; bearish short-term. A retracement down is due.
MONEY TREND & SHORT TERM TRADING
My short-term Money Trend indicator can be volatile; Friday it remains pointing down, but not as steeply down as previously; it is bearish, but not a strong call. Same note as yesterday: I added to short positions Monday using 2x short ETF’s. I’ll cover recent purchases Monday unless the S&P 500 falls; I’ll begin to cover shorts I have held longer. As I said before, I don’t expect to short for long; the trend is up. I have violated too many trading rules by staying short too long. (It was my intention to cover today but I was tied up all day and didn’t have a chance.)
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 57.8% Friday, but it remains “overbought” using the old overbought/oversold index. It was 60% Thursday. A number above 50% is usually GOOD news for the markets, but this is too high and suggests a pullback.
On a longer term, the 150-day moving average of advancing stocks dipped to 53.9%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) rose from +8 (percentage calculation method) to +17.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +211 Friday. (It was +166 Thursday.) The 10-day moving average of the change in spread dropped to minus-10. In other words, over the last 10-days, on average; the spread has decreased by 10 each day. Market Internals remain neutral on the market.
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).
LONG TERM INDICATOR
Friday, Price was negative; Sentiment, Volume and VIX indicators were neutral. The long-term indicator is HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONOn 12 July I increased my invested position in my retirement account to 25% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP). I added to that position Thursday 21 July bringing my invested total up to 40% in stocks. I expect to add more stocks should we get the anticipated pullback.
The NTSM system indicated Buy at the 11 Feb bottom; and again 2-days after the bottom on high up-volume; and from 22 Feb thru 25 April. I ignored the early signals convinced that it was a bear market bounce; I ignored more recent signals due to overbought conditions. I’m following my system now, especially since the Index has climbed above my initial sell-point of 2100 on the S&P 500 back in November 2015.
