“Oil prices extended losses on Wednesday after falling by as much as 3 percent in the previous session amid concerns that rebalancing the global oil market will take longer than originally expected.”
http://www.cnbc.com/2016/09/13/oil-rises-on-smaller-than-expected-build-in-us-crude-stocks.html
My cmt: Crude inventories fell, but gasoline stocks rose along with distillate stocks (diesel and heating oil) so questions remain over the direction of crude.
SMALL BUSINESS OPTIMISM DOWN (Advisor Perspectives)
“The Index of Small Business Optimism declined two-tenths of a point in August to 94.4, with owners refusing to expand; expecting worse business conditions; and unable to fill open positions, according to the National Federation of Independent Business (NFIB). "Once again, the NFIB survey showed no signs of strength in the small business sector," said NFIB Chief Economist Bill Dunkelberg.” Chart and commentary at…
http://www.advisorperspectives.com/dshort/updates/2016/09/12/nfib-small-business-survey-no-signs-of-strength-in-the-small-business-sector
My cmt: I’m not calling for recession, but the Optimism Index is below levels associated with the start of the previous 2-recessions.
DATA DUMP
There is a huge data dump coming Thursday that should move markets: Unemployment claims, PPI, Philly Fed, Empire Manufacturing, Industrial Production and more. “Do you feel lucky? Well, do ya, punk?”
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was down about 0.1% to 2126 at the close.
-VIX was up about 2% to 18.14 at the close.
-The yield on the 10-year Treasury slipped to 1.7%.
The S&P 500 dropped big time in the afternoon and I thought it would signal that the correction would continue for sure. The Index recovered in the last half-hour to close very near to yesterday’s close. The area around 2124 to 2120 has held for several days so perhaps the pullback won’t really get going.
Bollinger Bands are giving a bullish oversold signal, but this is due to a statistical aberration associated with low volatility. Bands were so close together recently that a 1% move in either direction would have given an oversold or overbought indication depending on which way the Index moved. For now, ignore Bollinger Bands.
Volume was down Wednesday, but was still about 10% above the monthly average. The fact that new-lows are higher than new-highs Wednesday is a big deal and that stat needs to reverse. If not, it’s a sign that this downturn will continue.
My Money Trend indicator was sharply down Wednesday as it has been for several days. The sum of 16-indicators was unchanged at -10.
All in all today was not much help in divining the future, but it looks like down is more likely.
VXX Trade. I am still holding VXX.
SHORT TRADE
I am still holding short positions in SH and QID.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained unchanged at to 46.9% Wednesday. It was 46.9% Tuesday. A number below 50% is usually BEARISH for the markets short-term.
On a longer term, the 150-day moving average of advancing stocks remained 55%. A value above 50% generally indicates an up-trend. The McClellan Oscillator improved from -62 to -58 (percentage calculation method), but that is relatively unchanged.
New-lows outpaced New-highs. The spread (new-highs minus new-lows) improved slightly to minus-6 Wednesday. (It was minus-16 Tuesday.) The 10-day moving average of the change in spread was -17. In other words, over the last 10-days, on average, the spread has decreased by 17 each day. Market Internals remained 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 (Comments and conclusions are unchanged from yesterday.)
Wednesday the Price and Sentiment indicators were neutral. Sentiment may be neutral on a multiple of standard deviations basis, but the current reading of 74% bulls is very high. VIX and & Volume indicators were negative and the calm-before-the-storm indicator is “carry-over negative”. Overall the long-term indicator remained SELL.
During the QE era, this indicator was too sensitive so I set a limiter on it that required the index to be 5% below its all-time high before a Sell would be tripped. Now, since there have been 2-extreme down-volume days in close proximity, I think additional caution is warranted so the limiter is “off”. On the other hand the recent market pattern has been to drop going into a FED meeting and rise afterward. I note this just to point out that this sell could be followed by a Buy soon thereafter. I have often under estimated FED impact.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONI reduced stock allocation to 30% stocks in the S&P 500 Index fund (C-Fund) Wednesday in my long-term accounts based on the Sell signal on 13 Sep. 30% invested is a good amount because in the unlikely event the index were to be cut in half, I would only lose 15%. On the other hand, it keeps a decent amount invested should the Index reverse up.
This is a very conservative view given that market conditions seem relatively sanguine right now. Since I am retired, my conservative position is reasonable for me and I sleep well. Additionally, I have missed opportunities recently by ignoring my system and for now I will follow the system.
