For Q2 2016, the blended earnings decline for the S&P 500 is -3.2%. The second quarter marks the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009...The forward 12-month P/E ratio for the S&P 500 is 17.1.” – Factset Earnings Insight.
My cmt: The chart indicates that Price (the S&P 500) is getting well ahead of actual earnings.
5 DECADES OF MIDDLES CLASS WAGES (Advisor Perspectives)
“Here's a perspective on personal income for production and nonsupervisory private employees going back five decades.” Details at….
http://www.advisorperspectives.com/dshort/updates/Employment-Wages-and-Hours-since-1964
MARKET REPORT / ANALYSIS
- Friday the S&P 500 was down about 0.2% to 2184.
-VIX dropped about 1% to 11.34.
-The yield on the 10-year Treasury rose to 1.58%.
For the Bears: The 10-dMA of closing Tick (the sum of up vs down trades at the close) is above 300 and Tom McClellan has indicated that this is a sell signal. There were also overbought indications in the old advance/decline ratio 2-days this week. My sum of 16 indicators was down Friday to -2 and the 10-day sum dropped from 45 to 39. The Smart Money Indicator (tracking late day market action) peaked on 26 July and has been headed down since then. The 20-dMA of New Highs is falling. Up-volume has been trending down. There’s not much to encourage the bulls now. On the other hand, the bearish signs aren’t screaming sell; they just say it’s time for a dip.
I was predicting that last week would be down; it was up 3 pts., about 0.1%. Once again I predicted a down week for this week – it was down 6 pts., about 3%. Batting 500 is pretty good, right? Or perhaps I should consider that over the long run a coin flip would be just as accurate. My guess is that Markets will be down next week.
VXX TRADE:
Today, the calm-before-the-storm indicator (low standard of deviation in recent market moves) still remains down and that suggests that VXX remained a buy as of Friday’s close. My trade is down 5% now, but VIX is basically unchanged from when I entered this trade. It’s just more evidence that VXX doesn’t track VIX all that well and there’s “contango” too. For more on VXX vs. VIX see “VXX Trade” at…
http://navigatethestockmarket.blogspot.com/2016/08/productivity-unit-labor-costs-wholesale.html
SHORT TRADE
I am cutting short positions and adding VXX within reasonable limits of risk. This is only in the trading portfolio (for me a relatively small portion of the overall portfolio). Don’t bet the retirement money trading.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Friday it is nearly flat; a neutral indication.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 52.5% Friday. It was 55.6% Thursday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks rose to 55%. A value above 50% generally indicates an up-trend. The McClellan Oscillator declined from -5 to -19.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) dropped to +108 Friday. (It was +169 Thu.) The 10-day moving average of the change in spread was -13. In other words, over the last 10-days, on average, the spread has decreased by 13 each day. Market Internals remained neutral on the market, but they have been deteriorating and that’s a bearish signal for the short-term.
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 the VIX indicator was positive; Price, Sentiment & Volume indicators were neutral. The long-term indicator remains 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 on dips.
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.
