“U.S. manufacturers grew at a modestly slower rate in July but are still expanding at a pace that is likely to offer the broader economy more support, a survey of executives found. The Institute for Supply Management said its manufacturing index dipped to 52.6 % last month from 53.2% in June, which marked a one-year high.” Story at…
http://www.marketwatch.com/story/us-manufacturers-grow-a-touch-slower-in-july-ism-finds-2016-08-01
CONSTRUCTION SPENDING (US News)
“U.S. construction spending fell for a third straight month in June with spending on nonresidential construction dropping by the largest amount in six months. Construction spending fell 0.6 percent in June following declines of 0.1 percent in May and 2.9 percent in April…” Story at…
http://www.usnews.com/news/business/articles/2016-08-01/us-construction-spending-drops-06-percent-in-june
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.1% to 2171.
-VIX dipped about 5% to 12.44.
-The yield on the 10-year Treasury rose to 1.5%.
The %-new-highs on the NYSE at the recent all-time high of 2075 was 7.2%. This is slightly higher that the average of all 15-highs going back to 1929 that was 6%. (The high for the data set is 11.2% in 1976 and the low was 2.3% in 1929.) The point is that the markets have broadened some (more stocks are participating in the rally), but perhaps not enough for the bulls to feel comfortable.
Market Internals on the NYSE continue to fall faster than the S&P 500 and this usually indicates a pullback is coming.
My 10-day sum of 16 indicators improved from -18 to -17 Monday, so indicators improved on a 10-day basis. Is a reversal to the upside on its way? Breadth (the %- of stocks advancing) resumed its decline on a 10-day basis so it still looks like the downtrend is still overdue. New-highs outpaced new-lows today, but the trend has been down. If there is going to be a pullback, new-high, new-low data needs to go negative on the spread. The spread is not there yet, but new-hi/new-low data is rolling over and this usually precedes a downturn.
I’m still guessing we see a pullback in the 4-5% range.
A huge up-day would be a signal for a short-term top. I remain Bullish in the intermediate term; bearish short-term. A retracement down is overdue.
VXX TRADE
My numbers didn’t support taking a position today, but the VIX was rising before the S&P 500 began to fall this morning so apparently some traders were buying options to profit from weakness in the Index. (For background on a possible VXX Trade see Friday’s blog.)
SHORT TRADE
I am still holding losing short positions waiting for a pullback.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Monday it remains pointing down; a bearish indication, but not as strongly as it has been.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 51.8% Monday. It was 54.1% Friday. A number above 50% is usually GOOD news for the markets, but this number peaked about 2-weeks ago and is reflecting deterioration in the markets.
On a longer term, the 150-day moving average of advancing stocks dipped to 53.5%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) dipped from -3 (percentage calculation method) to -18.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +222 Monday. (It was +277 Friday.) The 10-day moving average of the change in spread dropped to +4. In other words, over the last 10-days, on average; the spread has increased by 4 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
Monday, the Price indicator was positive; 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.
