“Filings for U.S. unemployment benefits unexpectedly rose
to the highest level in almost three months, extending increases from a
four-decade low. Jobless claims increased by 7,000 to 265,000 in the week ended
Oct. 29…” Story at…
PRODUCTIVITY (MarketWatch)
“American firms and employees boosted their productivity
in the third quarter for the first time in 2016, but the longer-term trend is
still a poor one that bodes ill for the U.S. economy. Productivity jumped at an
annual 3.1% pace in the three months covering July through September.” Story
at…
FACTORY ORDERS (Reuters/CNBC)
“New orders for U.S. factory goods rose for a third
straight month in September, but a further decline in order books suggested the
manufacturing sector will struggle to emerge from a prolonged slump. The
Commerce Department said on Thursday new orders for manufactured goods
increased 0.3 percent…” Story at…
ISM SERVICES (Investing.com)
“Services sector activity in the U.S. in October was
weaker than expected, industry data showed. The ISM said Thursday its non-manufacturing
PMI fell to 54.8 last
month…” Story at…
My cmt: A number greater than 50 indicates expansion.
STOCK MARKET “DICEY” (Financial Sense)
“…our belief is that we are approaching a peak in the US
economy and stock market with a possible recession next year. Consequently,
given our current outlook, we argued for a more defensive stance toward
equities... Momentum is on the downside, breadth is weakening, stocks are still
overbought on an intermediate and long-term basis, and economic data appears to
be slowing in the context of a possible Fed rate hike this December. Given all
of the above, the technical outlook is, in our view, "dicey".”
Commentary at…
My cmt: FS notes Bollinger Bands are “overbought”. They
are using a longer term than my analysis.
My shorter-term analysis shows Bollinger Bands are “oversold”
(suggesting a bounce up).
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was down 0.4% to 2089 on the
day.
-VIX rose about 14% to 22.08 at the close.
-The yield on the 10-year Treasury rose slightly to 1.81%.
Late in the day it looked like the data would suggest
that Thursday was the bottom of this pullback.
The S&P 500 tanked in the last hour and proceeded to miss some of my
key targets for calling a bottom. Still, there are some odd things going on in
the markets now.
Currently, the S&P 500 is 4.6% below its all-time
high of 2190 made on 15 August. This is
a surprise since the prior high was 59-days ago. It is odd to see no new high for 59
trading-days (nearly 3-months) while the Index has experienced such a small decline.
Since 2010, corrections (<20%-drop) have lasted 53-days on average, but
incurred an average decline of 12%. One must wonder whether the correction is
nearly over, or perhaps the Index has a lot further to fall. To assess the
direction, we need to read some more tea leaves.
There are some significant Bullish signs showing up.
There has only been one winning day on the last 10-days as of Wednesday and
again on Thursday. That has only happened 3-times since Jan 2010: (1) at the
bottom of the 12%-downturn of Jun 2010; (2) at the bottom of the 19%-downturn
of August 2011; (3) yesterday and today.
RSI, Bollinger Bands, and the Advance-decline Ratio are
all oversold – a bullish sign. Volume decreased today as the Index fell
further. This is indicating that selling
is slowing. The percentage of stocks advancing over the prior 10-days is
reaching levels associated with correction bottoms. Breadth is also hitting levels where
correction bottoms occur and the McClellan oscillator was -223 adjusted to
match McClellan’s methodology. Values
below -150 are an area where bottoms form.
Not all signs are bullish. The “Calm-Before-the-Storm”
indicator (based on statistical analysis of market action) remained bearish
again today. This indicator again suggests
there’s more downside ahead. Further, there was more late-day selling. That has
been going on for some time now. The
Money Trend indicator and Sum of 16-Indicators were trending down today, but I
would ignore them if I get a solid bottom signal.
Overall, it appears that we have further to fall, but my
guess is…not much. The election is such a wild-card that we may not have resolution
until next week.
Long-term, I’m fully invested at 50% in stocks (a
conservative-retiree allocation) – I remain “hold-my-nose” bullish.
TRADING PORTFOLIO
I was tempted to go long today, but late day action was
down sharply so I stayed out.
THURSDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 39.3 %. (39.5% yesterday.) A number below 50% is usually
BEARISH for the markets short-term.
-150-day moving average of advancing stocks: 52.5%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: improved from -227 to -223
(percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: -86 (It was -81 yesterday.)
-10-day moving average of the change in spread: -14. In
other words, over the last 10-days, on average, the spread has decreased by 14
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
Thursday the VIX, Volume and Sentiment indicators are
negative. The Price indicator was neutral. Overall the long-term indicator
remained HOLD, but only because short-term indicators may be turning up and so
far this downturn has been less than 5%.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I increased stock allocation to 50% stocks in
the S&P 500 Index fund (C-Fund) Friday, 23 Sep 2016 in my long-term
accounts.
Remainder is 50% G-Fund. This is a conservative retiree allocation.
