“The longest stretch of productivity declines since the end of the 1970s is threatening to restrain U.S. worker pay and broader economic growth in the years ahead. Nonfarm business productivity, measured as the output of goods and services produced by American workers per hour worked, decreased at a 0.5%seasonally adjusted annual rate in the second quarter as hours increased faster than output…” Story at…
http://www.wsj.com/articles/u-s-productivity-dropped-at-0-5-pace-in-the-second-quarter-1470746092
“Economists debate why productivity is so weak, but I
propose cheap money. By holding rates so low, the Fed induced a proliferation
of stores that have to be stocked, and manned. Overall sales may be up, but it
is spread around on a number of stores rising faster than necessary. Unit labor
costs are up thanks to new minimum wage laws. Higher minimum wages will
eventually slow store expansion. Yellen will not like the result." - Mike “Mish”
Shedlock. See commentary at...
UNIT LABOR COSTS (Nasdaq)
“Unit labor costs rose by 2% (the original read was +4%). In Q1, we saw unit labor costs fall 0.2%. Comparisons to a year ago: +3.1% in Q2 2015 and -0.8% the quarter previous to that. This implies some seasonality in the numbers, but even more importantly it clearly signifies labor is costing more than productivity.” Story at…http://www.nasdaq.com/article/productivity-and-labor-costs-below-expectations-cm662606
WHOLESALE INVENTORIES (Marketwatch)
“Wholesale inventories rose a revised 0.3% in June, up from an initial estimate of no change, the Commerce Department said Tuesday...The data suggest that inventories might not be as big a drag on second quarter growth as initially estimated.” Story at…
http://www.marketwatch.com/story/us-wholesale-inventories-rise-revised-03-in-june-2016-08-09
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was UP about 1pt to 2182.
-VIX rose about 1% to 11.66.
-The yield on the 10-year Treasury dipped to 1.54%.
VXX TRADE:
VXX split 1 for 4 Tuesday and that accounts for the big jump in price. My trade is actually down about 3.5%. Tuesday, the calm-before-the-storm indicator remains down and that suggests that VXX was still a buy as of Tuesday’s close.
VXX has been down while VIX has been rising – that’s frustrating, but not all that unusual. From The Street: “The reason for this sort of price action relates to the relationship between VIX futures and the index. More often than not VIX futures are priced at a premium to the index and the second month is priced at a premium to the front month. As futures approach expiration the value of the futures contracts will gravitate to the index. This price action can result in VIX futures losing value on days that VIX moves up. This price action would also result in VXX moving lower on the day despite VIX closing higher.” For more on VXX see…
https://www.thestreet.com/story/11976706/2/5-misperceptions-about-vxx.html
As noted previously, VXX loses value because the contracts required to mimic VIX must be replaced with higher priced contracts as the old ones expire. VXX is not a vehicle to be held for a long period.
This trade may take 1 to 3-weeks to play out, but a big move up in VIX will also move VXX up (about half as much) so no reason to panic yet.
Bollinger Bands: The Bollinger Band Squeeze Play remains Tuesday on the S&P 500 and that indicates a breakout is coming. In addition to a squeeze (upper and lower bands close together) the Index is still only 2 pts. below its upper band and that is a bearish indicator.
Indicators: My 10-day sum of 16 indicators improved from -16 to -7 Tuesday. Since a turn-down is likely soon, it is not a surprise that my trend-following indicators are getting more positive.
SHORT TRADE
I am still holding short positions.
MONEY TREND INDICATOR
My short-term Money Trend indicator can be volatile; Tuesday it is still flat; a neutral indication.
Overall, this week is still likely to be down.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dipped to 53.2% Tuesday. It was 53.9% Monday. A number above 50% is usually GOOD news for the markets.
On a longer term, the 150-day moving average of advancing stocks remained 53.9%. A value above 50% generally indicates an up-trend. The McClellan Oscillator (a Breadth measure) declined from -2 (percentage calculation method) to -4.
New-highs outpaced New-lows. The spread (new-highs minus new-lows) rose to +265 Tuesday. (It was +247 Monday.) The 10-day moving average of the change in spread dipped to 5. In other words, over the last 10-days, on average, the spread has increased by 5 each day. Market Internals slipped to 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
Tuesday, the Price & VIX indicators were positive; Sentiment & Volume indicators were neutral. The long-term indicator is BUY. The important Buy signal was on 22 February 2016 so this one really just shows that the markets have been doing well recently.
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.
