“U.S. employment rose more than expected for the second month in a row in July and wages picked up, bolstering expectations of faster economic growth, and raising the probability of a Federal Reserve interest rate increase this year. Nonfarm payrolls rose by 255,000 jobs after an upwardly revised 292,000 surge in June…Highlighting job market strength, average hourly earnings increased a healthy eight cents and are up 2.6 percent year on year, while workers put in more hours.” Story at…
http://www.reuters.com/article/us-usa-economy-idUSKCN10F1ET
MARKET REPORT / ANALYSIS
- Friday the S&P 500 was UP about 0.9% to 2183 (a new all-time high).
-VIX dipped about 8% to 11.39.
-The yield on the 10-year Treasury jumped to 1.58%.
BUYING VXX
Today my calm-before-the-storm indicator flashed sell so I bought a small position in VXX. (This ETN is long the S&P 500 VIX and will be up as VIX rises.) See the Friday post from last week for more.
I have been suggesting for a while that it might take a big up-day to finish this up-trend at least in the short-term. Friday we did see a statistically significant day and that means that the price-volume exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Monday). Here, it also looks like it may signal some down-time ahead.
The economic news has been improving, but too much of a good thing will bring back FED rate hike worries, so the news is mixed.
The Squeeze Play remains Friday on the S&P 500 Bollinger Bands that indicates a breakout is coming – the most likely breakout direction is down. In addition to a squeeze (upper and lower bands close together) the Index is very close to its upper band and that is a bearish indicator.
My simple recession indicator compares the S&P 500 index to the Industrial Select Sector SPDR ETF (XLI) because it is a cyclical ETF and should be more recession sensitive than the S&P 500. Currently the XLI is under-performing the S&P 500 in almost all time frames; while it is not enough to indicate a recession, it does show investor concern.
My 10-day sum of 16 indicators improved from -32 to -26 Friday; indicators reversed direction, but remain in negative territory on a 10-day basis. Internals improved, but the trend in new-high / new-low data continues slightly down. So the question becomes, “does this new-high portend more follow-though to higher-highs? My guess is no for the short-term. Next week is most likely to be down.
SHORT TRADE
I am still holding short positions.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Friday it remains pointing down, but not by much; a neutral to slightly bearish indication.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 52% Friday. It was 51.4% Thursday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks climbed to 53.8%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) improved from -24 (percentage calculation method) to -4.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +244 Friday. (It was +163 Thursday.) The 10-day moving average of the change in spread rose to 3. In other words, over the last 10-days, on average, the spread has increased by 3 each day. Market Internals improved to positive 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, 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.
