“U.S. consumer spending rose more than forecast while the annual increase in core PCE [Personal Consumption Expenditures] prices remained stable as expected in June, official data showed on Tuesday. In a report, the Commerce Department said that personal spending increased by a seasonally adjusted 0.4% last month…” Story at…
http://www.investing.com/news/economic-indicators/u.s.-personal-spending-rises-0.4-in-june,-core-pce-prices-up-0.1-417978
AUTO SALES (Bloomberg)
“Ford Motor Co. and General Motors Co. reported U.S. light-vehicle sales in July that fell more than analysts had anticipated while Nissan Motor Co. and Fiat Chrysler Automobiles NV gained less than expected, reinforcing concerns that the market may have peaked with last year’s record deliveries. GM, the largest U.S. automaker, said sales slid 1.9 percent…” Story at…
http://www.bloomberg.com/news/articles/2016-08-02/ford-s-u-s-july-auto-sales-fall-more-than-analysts-estimated
5-QUESTIONS FOR THE BULLS (Real Investment Advice)
“There has been a litany of articles written recently discussing how the stock market is set for a continued bull rally. The are some primary points that are common threads among each of these articles which are that interest rates are low, corporate profitability is set to recover and the Central Banks monetary accommodations continue to put a floor under stocks…The concern with each of those points, which are supporting higher asset prices, is they are all artificially influenced by outside factors. Interest rates are low because of the Federal Reserve’s actions, corporate profitability is high due to accounting rule changes following the financial crisis and Central Banks globally are pushing liquidity directly into the financial system.” – Lance Roberts. Commentary at…
https://realinvestmentadvice.com/5-questions-market-bulls-must-answer/
INVESTMENT STRATEGY (Raymond James)
“…in 1997…astronomical equity valuations …stayed [high] for over three years. The equity markets are doing it again here. You can either take that as “a few years from now we are going to be in a bear market,” or that the stock market is “telling” us things are going to get better. I am “long”…” – Jeffery Saut, Raymond James
http://www.raymondjames.com/inv_strat.htm
My cmt: Interesting commentary.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 0.6% to 2157.
-VIX rose about 7% to 13.34.
-The yield on the 10-year Treasury rose slightly to 1.54%.
The size of the down-move Tuesday was statistically significant and that means that the price-volume move exceeded my statistical parameters and, in about 60% of the time, that leads to an up-day the next day (Wednesday). Short-term, the trend still looks down.
If there is a big bounce up Wednesday, I may cut my invested position to 30% (down from 40%). The reason is simply that short-term indicators are pointing down and this still could be a bear market bounce. It’s a very conservative move, especially given that I am bullish in the intermediate term.
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 declined from -17 to -22 Tuesday, so indicators are getting worse on a 10-day basis. Internals don’t look good either and the trend in new-highs / new-low data continues down. If there is going to be a significant 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. Perhaps it is getting underway now.
VXX TRADE
My numbers didn’t support taking a position so I may have missed the chance. (For background on a possible VXX Trade see Friday’s blog.) The stat I track for a VXX trade is moving the other way so it is not likely that I will be moving to VXX anytime soon.
SHORT TRADE
I am still holding losing short positions.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Tuesday it remains pointing down and it has returned to steeply down; a bearish indication.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 49.9% Tuesday. It was 51.8% Monday. A number below 50% is usually BAD news for the markets.
On a longer term, the 150-day moving average of advancing stocks dipped to 53.4%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) dipped from -18 (percentage calculation method) to -48.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) dropped to +76 Tuesday. (It was +222 Monday.) The 10-day moving average of the change in spread dropped to -8. In other words, over the last 10-days, on average; the spread has decreased by 8 each day. Market Internals switched to negative 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
Tuesday, 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.
