Market Timing – Weekly Stock Market Strategy – February 2014

Posted: March 5th, 2014 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 2/3/14

Consumer Spending was the sole beat in a week of sub-par economic news and volatile stock prices. New Homes Sales, Durable Goods Orders (month over month and ex-transportation), Jobless Claims and Pending Home Sales all missed. The big news this week is the Fed continued to taper, reducing monthly asset purchases to $65 billion.

Monday’s close was at 178.01, below our exit price of 178.89, so that is our exit price for the Intermediate Term Market Call. Last Week I mentioned a close on the VIX (for the week) below 17 might be our first indication that we are out of the woods. Well the VIX closed Friday at 18.41 so that didn’t happen. The XRT, which is the retail sector ETF, is dangerously close to a long-term sell signal. Remember the XRT gave us a early indication to the change in the intermediate term trend. We are still a long way from a Long-Term Market Call sell signal. A close below 170 on the SPY will require a closer look. Enjoy the Superbowl!

 

Weekly Market Update 2/9/14

The Employment Situation Report came out Friday and since that is the “big daddy” of economic reports I will start there. Goldman Sachs referred to the employment report as “disappointing,” I saw it a little differently. Non-farm payrolls missed consensus and range while Private Payrolls missed consensus but was in range. The Unemployment Rate dropped another one-tenth of a percent to 6.6%. What was different this time is the labor force participation rate actually increased two-tenths of a percent to 63%. What does that mean? It means the decrease in the Unemployment Rate was actually caused by, drum roll please, increased employment instead of people dropping out of the work force, which has been the trend since the recession began. Maybe I am being overly optimistic considering the actual number of jobs created in January was below expectations but at least the trend in the headline number this month was not the big lie it has been. In other economic reports this week. Jobless Claims was a slight beat, while the ISM Manufacturing Index was a big miss.

A strong rally in the stock market on Thursday and Friday was enough to erase Monday’s nasty sell-off. The VIX managed to close below 17 this week to 15.29. This was the only modest indication that we might be out of the woods. Don’t buy it folks it is too soon to tell. When we see a close above 184 on the SPY, only then will I believe that the correction is likely over. Even during Monday’s decline, market internals never approached oversold levels. We have seen some major technical indicators broken indicating a bearish bias in the intermediate term trend. I do not think that can honestly change until we have seen some of the market internals reach oversold levels. It is possible we could see this short term rally continue for a few more days to the 181-183 level. A test or breach of the recent lows should follow. I will be force to abandon this thesis on a close above the 183 level on the SPY.

 

Weekly Market Update 2/16/14

Looking at the stock market you would have never guessed all the economic surprises this week were bearish indications for the economy. Jobless Claims, Retail Sales, and Industrial Production all missed there consensus numbers. It seems like the weather has been used as an excuse for poor reports for so long it is like the boy who cried “wolf!” However, winter has actually been severe enough in large parts of the country that even I could believe its possible this time. Janet Yellen spoke early this week and did a fine job of calming the markets. We had no doubts that she would be accommodative, but until she had her national audience I couldn’t be 100% sure how she would be received. Bernanke was starting to come across a little tired and cranky the last few years. Can’t say I blame him. Anyway maybe it was just a new face on the Fed that helped. Either way Yellen is off to a fine start guiding these manipulated markets.

Well I opened the window and tossed the thesis I sent you last week. The SPY closed at 184.02, just above my “uncle” point. This week my stock/bond model just crossed back into bullish territory. The Intermediate Term Market Call has set up to reverse back to bullish if SPY closes above 184.02 sometime this week. I believe the markets are in a state of transition. These periods can be very treacherous for investors and traders. Even though the models I follow are now leaning bullish, I don’t think we are completely out of the woods. Occasionally the markets like to move in a fashion that will inflict the greatest amount of pain on the largest number of market participants. The January sell-off was enough to spook investors and get some traders short. Now this rally is forcing the shorts to cover and investors to reconsider their decision. What would cause even more pain at this point? The markets would take out the stops on short positions just above the January highs forming a double top on the charts before selling off. All this is speculative folly because our Long-Term Market Call has been bullish all this time and is nowhere near a change in trend.

 

Weekly Market Update 2/23/14

The economic reports have now established a trend with more misses then beats lately. This week the only report to beat consensus expectations was the PMI Manufacturing Index Flash report. The Empire State Manufacturing and Housing Starts reports both missed expectations. We also had two reports that missed consensus by a wide margin. The Housing Market Index and Philly Fed Survey were the big misses this week.

The SPY was not able to close above the 184.02 I had mentioned last week. There is still a possibility the SPY is forming a double top. The Dow Jones Industrial Index is still about 3% off its late 2013, early 2014 highs and was not able to close this week above last Friday strong close. The Nasdaq Composite Index was able to make new highs in the middle of January. The Nasdaq also managed to close at new highs for the year this past week. If the SPY and DJIA do not follow the lead of the Nasdaq and make new highs for 2014 soon, I think it will be further evidence that the stock market is in a topping pattern.

 


Market Timing – Weekly Stock Market Strategy – January 2014

Posted: February 7th, 2014 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 1/5/14

Economic reports over the last two weeks have seen few surprises. The Dallas Fed Manufacturing Survey missed consensus and range. Motor Vehicle Sales were only a slight miss. PMI Manufacturing Index was the only report to beat consensus and range and it was a slight beat at that. The always conversational Employment Situation report is out this Friday.

The SPY has made new highs each of the last two weeks. What concerns me is investor bullishness. According to Investors Intelligence, newsletter writers are now 59.6% bullish and 14.3% bearish. The spread between the two is an extreme usually only witnessed near major market tops. Of coarse those prior tops were at least a little less influenced by the Fed. What I mean is, as vulnerable as the current market is to a correction, I refuse to underestimate the influence the Fed is having on the market. So this topping could take longer than most, including myself expect. That being said I think there is a real possibility of at least a 10% correction beginning by the end of the March. I am raising the stop on the SPY to 173.

 

Weekly Market Update 1/12/14

The big report this week was the Employment Situation report and it missed pretty bad. Non-farm payrolls were expected to add 200k jobs. They added only 74k. Private payrolls were expected to add 189k jobs but came in at 87k instead. The so-called good news was the unemployment rate which dropped from 7.0% to 6.7%. What was not headline news and is the major factor for the rate drooping to 6.7% is the fact that 535k Americans “left the workforce” in December and are no longer considered unemployed. The labor force participation rate (percentage of working Americans), is at a 35 year low of 62.8%. I wonder if the Fed will need to move their target of 6.5% unemployment for tapering since this number does not seem to be tied to any meaningful growth at the moment. International Trade and ISM Non-Manufacturing Index also missed consensus estimates. The only beat this week was the ADP Employment report which obviously did not reflect the same as the Employment Situation.

Technically not has much has changed from last week, or the week before that. The SPY has traded in a relatively small range the last three weeks. The Volatility index is trading near the lows of the last year. Occasionally this index can be a good contrary indicator. I am not sure what will be the trigger to the beginning of a correction. The Employment Situation report always has the ability to change the trend of the markets. This report was weak enough to indicate the Fed will need to continue their easy money policy for the foreseeable future.

 

Weekly Market Update 1/19/14

The Treasury Budget and Empire State Manufacturing Survey beat consensus and are indications of a economy improving. Import and Export Prices as well as the Producer Price Index both came in higher than the consensus the range. This could be an early sign that inflationary pressures could be heating up. The numbers were still low only the future trend will show how much of a problem inflation might become.

The indexes have not changed much in the last week. What is of concern is the price action in the retail sector. XRT, the retail sector ETF, ;lost 3.34% this week and has entered an intermediate term bear market. I am not sure how long the indexes and the retail sector can move in opposite directions but my guess is not very long. The XRT will need to form a base or the indexes will soon follow retail stock lower.

 

Weekly Market Update 1/26/14

This week we saw the bulk of the economic releases on Thursday. Of those reports PMI Manufacturing Index Flash and the FHFA House Price Index Missed. The misses weren’t major and not the cause of the sell-off that began on Thursday.

The sell-off that began Thursday was a result of economic news out of China. Chinese manufacturing activity showed a drop in its survey. This along with concerns out of a few emerging market countries was enough to give the U.S. Markets one of its worst weeks since May 2012. The Volatility Index (VIX) was up almost 46% this week. That is not a typo.

The worst week in 17 months has obviously changed a few things. A close Monday below 178.89 will trigger a sell signal on the Intermediate Term Market Call. This signal has been choppy as a few of the technical indicators I follow have been over this bull move. The Stock Bond Model I follow has also given a sell signal. The last few spikes in the VIX were good times to buy. If the VIX can close below 17 next Friday we may be out of the woods for the time being. So I have 3 models I follow that have given a cautionary signal. A look at the market internals left me speechless. Despite this being the worst week in a long time, the market internals were no where near oversold conditions. In fact some were closer to overbought than oversold. What does all that mean you ask? Well to me it means that despite the pullback this week, there is still considerable downside risk. Some of the previous spikes in the VIX were preceded or accompanied by oversold readings in the market internals. Not this time. It appears that maybe the retail sector, as mentioned last week, was a good leading indicator. I will be reducing my exposure with a close this week below 178.89 on the SPY.

 


Market Timing – Weekly Stock Market Strategy – December 2013

Posted: January 3rd, 2014 | Author: | Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , | No Comments »

Weekly Market Update 12/1/13

The economic reports this week were a mixed bag from mostly non-market moving reports. The Richmond Fed Manufacturing Index handily beat consensus estimates, while Jobless Claims came in slightly better than expected. On the flip side the Dallas Fed Manufacturing Survey missed estimates on business activity. Consumer Confidence and Chicago Fed National Activity also missed their consensus estimates. There seems to be some irony in the fact that indexes continue to make new highs while Consumer Confidence peaked in August. This Friday the always important and occasionally fudged Employment Situation Report.

The stock market continues its run at making new highs. With every new high the risk or need for a correction also increases. This week the spread between bulls and bear in the investor sentiment survey jumped rather dramatically. By no means are we near historical extremes however the spread is wide enough to indicate a possible correction. The volatility index is also becoming somewhat concerning, Not for making an extreme, we have been trading at these relatively low levels for most of the year, but for the prolonged decrease in volatility within the volatility index. The width of the Bollinger Bands on the volatility index have been compressing and a prolonged compression in these bands can be a precursor to a volatile price movement. And the only direction we could have a volatile move in the volatility index is up. This would most likely only occur in the midst of a stock market sell-off. Just a few more reasons to keep an eye on the exits and not become overly complacent with this aging bull market.

 

Weekly Market Update 12/8/13

It truly is a Christmas miracle. I can not recall the last time there were this many reports that beat consensus in the same week. The following beat consensus and range if there is one for that report: ISM Manufacturing Index, Motor Vehicle Sales, ADP Employment, Jobless Claims, Non-farm Payrolls and Consumer Sentiment. PMI Manufacturing Index, GDP, Unemployment Rate and Private Payrolls all beat consensus but not range. New Home Sales and Personal Income were the only misses for the week. All this after Black Friday sales showed only modest gains over last year. The Employment Situation was quite positive with the unemployment rate falling from 7.2% to 7.0% and non-farm and private payroll adding about 200k jobs each.

Despite the rally in the stock indexes on Friday, the market still looks poised for a correction. If the indexes are not able to continue the rally that started Friday into next week, we are likely witnessing the last gasp at the highs before a more meaningful correction. That being said the only thing negative about last weeks economic reports is the easy money from the Fed might be coming to an end. Increased speculation of Fed tapering their bond purchases (money printing) could also put pressure on the markets. So despite all that seems miraculous, there is plenty of reason to be cautious.

 

Weekly Market Update 12/15/13

Last weeks economic reports miracle did not last long. This week Jobless Claims was a huge miss coming in a 368,000. Wholesale Trade and Business Inventories were a slight miss showing increases in inventories. It was a quiet week for reports with few surprises. There are quite a few more reports this coming week.

In the upside down world of the stock market not even a lousy Jobless Claims report could rally stocks this past week. All the major indexes ended near the lows for the week. None of the indicators I follow show that the market is extremely oversold. However the SPY is currently near a short term inflection point. That means that if the bull market is to remain intact, on a short term basis, we may need to see a bounce soon. With margin debt and stock market optimism at extremes I am inclined to believe the market is setting up for a more meaningful correction. A close below 177 would likely mean this correction should take us to a minimum of 173 in the short-term. This is just a guestimate here but I think it will take a close below 173 to turn the Intermediate Term Market Call bearish. At that point I will reduce my equity exposure by 50%. The Long-Term Market Call, which has been bullish since February 2012, will probably require a close below 163. That is still 8% below Fridays close.

 

Weekly Market Update 12/22/13

This weeks economic reports were a mixed bag but leaned slightly to the positive. Industrial Production, Housing Market Index, Housing Starts, and GDP all beat estimates. PMI Manufacturing Index Flash, and Kansas City Fed Manufacturing Index both missed consensus estimates.

Ben Bernanke delivered the second miracle of the season. On Wednesday the Fed announced they would reduce monthly bond buying from $85 to $75 billion per month. This amount assured that quantitative easing will continue for the foreseeable future. It also allowed the Fed to pat them selves on the back and say “things are getting better so we can reduce our bond buying.” So for the time being the tapering concerns have been dealt with. The problem is the Fed is obviously being held hostage. We all know now that the only thing that can replace quantitative easing is a strong economy. I think we have also drawn a line in the sand. If the SPY closes below 178, the opening price of the SPY prior to the Fed announcement, we could be in for some real trouble. That makes the 177 to 178 level on the SPY that much more important.

Unless we see a major move in the indexes, I will be taking next week off.

 


Market Timing – Weekly Stock Market Strategy – November 2013

Posted: December 6th, 2013 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 11/3/13

Now that the government shutdown is behind us the economic report releases are getting back to normal. The Chicago PMI was the only report this week to beat consensus. While the Producer Price Index was a slight beat showing inflation is currently under control. Pending Home Sales and the Dallas Fed Manufacturing Survey missed their consensus estimates. Industrial Production and the ADP Employment Report were both a slight miss on consensus although ADP was within range. If the ADP is any indication I would not expect any mind blowing positive news from the Employment Situation Report next Friday. Bottom line the economy is still not strong enough for the Fed to consider changing policy.

We are still long. From a technical perspective, the stock market still looks dangerously overbought. However, in a Fed induced rally, moves can go on longer than anyone would expect. Strangely as overbought as the indexes look, most of the internal indicators have some room to go before they become overbought. I am raising the stop on the SPY to 166.50 for the Intermediate Term Market Call.

 

Weekly Market Update 11/10/13

If the Employment Situation were the Judge, it would appear that the government shutdown was positive for the economy. Non-farm Payrolls and Private Payrolls both easily beat their consensus estimates by 80k plus new jobs. Personal Income and GDP also beat consensus. Factory Orders was the lone miss among economic reports. Maybe the government should shut down more often.

A 25 basis point rate cut by the European Central Bank caused a somewhat concerning sell-off Thursday. Friday the market shook it off and erased all of Thursday’s losses. Market Sentiment is approaching a dangerous level. That being said the several market internals are nowhere near overbought. This despite the indexes being near highs. As long as the Fed is printing I would have to say this market still has legs. That being said, caution is necessary as the outlook could change quickly.

 

Weekly Market Update 11/17/13

It was a relatively quiet week in terms of economic reports. Positive reports were International Trade which had a larger than expected deficit. Yes ironically this can be positive for economy. Also Import and Export Prices declined for the month indicating inflation is currently not a problem. The sole miss this week was the Empire State Manufacturing Survey which showed a decline in manufacturing in the New York region. Overall signs indicate we are still treading water since reports continue to be mixed.

The indexes on the other hand were anything but quiet this week. The major indexes all showed solid gains of over one percent for the week. When we are in new high territory, gains like this are meaningful. This is why despite my concerns about the market being overbought the trend is the most important factor at any given time. It is also why I will not recommend exiting our long position unless the market starts to turn. Trying to pick the exact top is a fools game and can leave you chasing the market and missing potential profits.

 

Weekly Market Update 11/24/13

The only trend in the economic reports is the consistency of mixed reports on a weekly basis. This week Business Inventories and the Philly Fed Survey missed consensus estimates. PMI Manufacturing Index Flash was the only economic report this week to beat consensus. There was some breaking news this week about the Employment Situation reports leading to the 2012 elections being fudged. At the time I said this report is “full of holes.” It will be interesting to see if and how this story develops.

The stock indexes made new highs again this week. On a price and technical basis the indexes look very overbought. Surprisingly, market internals, things like the McClellan Oscillator and the NYSE Summation Index, are currently no where near overbought. It is hard to know when the market is likely to top in a “normal market.” It is significantly more difficult to know when a top is likely when the Fed is printing $85 billion a month in new money. That new money has to go somewhere. That being said I think it is possible we will see a 5-10% correction within the next two months. I have raised the stop on the SPY to 170.

 

 


Market Timing – Weekly Stock Market Strategy – October 2013

Posted: November 3rd, 2013 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 10/6/13

Due to the government shutdown, several reports this week were not released. Those reports not released included Construction Spending, Factory Orders and, the Employment Situation. Of the few remaining reports only the Dallas Fed Manufacturing Survey beat consensus. The ISM Non-Manufacturing Index was the only report to miss while the ADP Employment came in on the low end of its range.

Another report that the government is not issuing do to the shutdown, is the Commitment of Traders (COT) Report. The last report issued before the shutdown was showing the commercials where holding extreme short positions in several of the stock index futures. This most often only occurs at major tops. I believe the sell-off over the last two weeks is minor compared to historical declines after COT extremes. On a technical level, the SPY appears to be at a low significance inflection point. The market bounced nicely of the 50-day moving average twice in the last five days. A close below the 50-day moving average will most likely mean the sell-off is not yet over. The stock indexes are also nowhere near oversold levels. I think it is highly likely the SPY trades down to a higher significance inflection level near the August lows near 163-164.

 

Weekly Market Update 10/13/13

Of all the reports scheduled for release this week, only two were actually released. The government shutdown prevented the rest from being released. Jobless Claims missed consensus coming in significantly higher and the highest number since March. Apparently it is not to worry, the high number was due to a backlog caused by a computer glitch. The only other report not affected by the shutdown was Consumer Sentiment and it was inline with consensus estimates.

The sell-off that occurred Tuesday and Wednesday was enough to trigger a setup for a change in position in the Intermediate Term Market Call. The setup was probably a better indicator to buy than an indication to sell. The Market proceeded to rally strongly Thursday and Friday. The Volatility model I follow also was at a sell setup. This model too has been a low risk opportunity to enter the market since 2011. One good thing came from this weeks price action. I feel comfortable placing the stop below the low close for the week. The stop level for the Intermediate Term Market call will be 165.50. The long-term trend is still clearly in place. However none of the danger signs mentioned in previous updates have been negated.

 

Weekly Market Update 10/20/13

The government shutdown prevented all but a couple economic releases this week. Of the few released only one missed consensus and it still was in range. Jobless Claims came in at 358k when consensus was at 330k. This number has jumped over the last two weeks and is significantly higher than its 4 week moving average at 325k. The jump is the private sector that is directly related to the government shutdown. Now that congress has kicked the can 3-months down the road, reports will start to be released again this week. The Employment Situation, originally scheduled for release Oct 4th, is now schedule for release on Tuesday.

Of the three major indexes only the DJIA has yet to make new highs. It was a very strong week for the markets. Now that the government shutdown is behind us, I am not sure what will continue this move we have witnessed since October 9th. This could be a “buy the rumor, sell the news” situation. The news being the end of the government shutdown. As long as this market can continue to make higher highs and higher lows the long-term trend will remain bullish.

 

Weekly Market Update 10/27/13

The delayed Employment Situation was the big report this week. Despite the decline the the unemployment rate from 7.3% to 7.2%, it was was not a good report. Non-farm Payrolls and Private Payrolls missed both their consensus and consensus range. At least by this point in the game we are aware that a decline in the unemployment rate is not related to job growth. The only other surprises this week were FHFA House Price Index and PMI Manufacturing Index Flash. Both of which missed their consensus estimates.

Despite mediocre economic reports the markets continue their bullish assent. Maybe it is the market’s addiction to QE that keeps the markets moving higher on week employment reports. Anyway the markets are now somewhat overbought on a technical basis. Consolidation at this point is a real possibility. We remain long and will look for opportunities to raise our stop.

 


Market Timing – Weekly Stock Market Strategy – September 2013

Posted: October 8th, 2013 | Author: | Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , | No Comments »

Weekly Market Update 9/1/13

In contrast to next week it was a relatively quiet week. Both Consumer numbers, Sentiment and Confidence, beat consensus estimates. GDP was also notable coming in at the high end of its range. Durable Goods Orders was the lone miss for the week. Next week has a lot of economic releases with the Employment Situation coming out on Friday.

From a technical perspective the most telling thing was the lack of any kind of bounce in the market. We finished the week very close to the lows for the week. Of course the possibility of a military attack on Syria has caused some concerns. Also looming over the market is another debate over the debt ceiling coming in October. There is plenty of reason to be cautious over the next few months. The Long-Term Market call is probably safe as long as the SPY remains above 155.

 

Weekly Market Update 9/8/13

The Employment Situation did not have any real surprises in terms on the consensus expectations. But, as they say “the devil is in the details.” Last months non-farm and private payrolls were reduced sharply. The unemployment rate dropped from 7.4% to 7.3% based more on a reduction in the work force than job creation. Labor force participation is now at its lowest point since 1978. The only other economic report worth noting was the ISM Non-Manufacturing Index which beat consensus. PMI Manufacturing Index was a slight miss, while Jobless Claims slightly beat expectations.

The stock market indexes managed a modest rebound this week. A few weeks ago I had mentioned 169 on the SPY as being a point of interest. I still think it is. The long-term picture is still decidedly in a uptrend. The intermediate term picture is not quite as clear and I think the 167-169 range will act as resistance. A day or two of closes above this range should keep the long term uptrend in place. If the SPY fails to break through this range the long-term becomes a little less clear. The daily charts could be forming a head and shoulder top. This suggest a move below 163 would have a minimum projected target of approximately 150 on the SPY.

 

Mid-Week Update 9/11/13

The SPY is right up against the 169 level. I mentioned this past weekend that I see this level as resistance. That being said one of the models I follow has triggered a buy setup. If the SPY is trading above Tuesdays close of 168.87 in the final hour of trading Wednesday my Intermediate-term Market Call will turn bullish. If we see a close above this level this week the Intermediate-term Market Call will turn bullish.

Personally I am skeptical of this rally. I do trust the models I follow to keep me out of any major trouble. So if this turns out to be a bad signal my models should have me back out of the market before any serious damage can be done.

 

Weekly Market Update 9/15/13

More good news than bad in terms of economic reports this week. Jobless Claims beat consensus expectations by a wide margin with a rare sub 300,000 print. Over 30,000 under the previous weeks number. Inflation remains in check as Export Prices beat consensus and had its 6th month of negative reads. The only miss this week was Consumer Sentiment which came in significantly under the consensus estimate.

This less bad news on the economic front combined with a possible peaceful alternative to the Syrian crisis lead the indexes higher this week. My Intermediate Term model turned bullish on Wednesday. I used the SPY close on Wednesday as my buy price. The Intermediate Term model has been very volatile lately and has produced a string of losers. The Long-Term Model has been long for over a year and a half now. Recent tops on the the SPY are forming bearish divergence and topping formations on indicators such as MACD and RSI. Until the recent highs on the SPY at 170.97 are taken out on a closing basis, preferably multiple closes, I will remain skeptical of this rally. The Syrian crisis has kept US budget issue from taking center stage but that is likely to change in the coming weeks.

 

Weekly Market Update 9/22/13

Bullish economic reports this week included Jobless Claims, Existing Home Sales and the Philly Fed Survey. Bearish reports were the Empire State Manufacturing Survey that came in on the low end of its range and the FOMC announcements. The FOMC has decided to delay the reduction in their bond purchase program. Meaning the economy has not improved enough to begin tapering bond purchases.

Follow the FOMC announcements on Wednesday the three major stock indexes all made new highs. What is troubling to me is those gains were, for the most part, given back the next two days. When the gains from a major news announcement, such as the Fed taper, are given back in a short period of time, the market will tend to start a new move in the opposite direction. Except for the NASDAQ, we are seeing a continued negative divergence in the weekly charts of the S&P 500 and the DJIA. The charts of these two indexes have made new highs while the MACD is turning lower and the RSI is making lower peaks. This can occur at market tops. I think it is wise to be cautious at this point in time.

 

Weekly Market Update 9/29/13

There was not much for surprises in this weeks economic reports. The PMI Mfg Index Flash was the only report to miss consensus estimates. No reports beat consensus this week. The employment situation report is out this Friday. I expect more of the same, a reduction in the unemployment rate, which is usually considered bullish. However any reductions we have seen are from a reduction in the workforce and underemployment.

If the uptrend is to continue, the SPY will need to find support above 165. The weekly charts look a little like we could be forming a top, but is to early to be sure. I think there is some real indecisiveness in the market right now. We may be witnessing the Fed losing the benefits of monetary action. We may be seeing the realization that there is no easy way out of this debt bubble. The Fed chairman will speak on Wednesday, so we are likely to see some volatility the second half of the week.

 


Market Timing – Weekly Stock Market Strategy – August 2013

Posted: September 2nd, 2013 | Author: | Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , | No Comments »

Weekly Market Update 8/4/13

The Employment Situation was the big report this week so I will start there. The unemployment rate came in consensus range but dropped from 7.5% to 7.4%. This drop once again primarily from a decline in the labor force not due to job creation. Non-farm and Private payrolls both missed their consensus estimate although Non-farm payroll did manage to come in range. Average hourly earnings missed both consensus estimates and range. Another interesting statistic 3 out 4 jobs created this year have been of the part-time variety.

In other economic reports this week PMI Manufacturing Index, ISM Manufacturing Index and, Jobless Claims all beat consensus estimates. Construction Spending missed its target. Total stock market capitalization has increased by $12.3 trillion since March 2009, while US GDP has increased by only $2.3 trillion over the same time frame. Be vary wary of the illusion of a recovering economy.

I am constantly reminded of the stock market axiom of “don’t fight the fed.” Yet even as the stock market continues to make new highs, the fed is losing the battle to keep long-term rates down. Despite spending $85 billion a month and owning 31% of all outstanding 10-year equivalents the fed is losing this battle. Long term treasuries are currently near a level that has supported the TLT for the past two years. Treasuries and stocks quite frequently move in the opposite direction just as they are now. What feels different is the artificial nature in the markets. I am usually very skeptical when someone says this time is different. But that is usually said to justify a bull market. There are many indications that we may be entering the final phase of this bull run. NYSE margin debt peaked in April. Margin debt previously peaked after setting record high in March 2000 and in July 2007. Both were within month of the top in the stock market. I am very cautious of the market move over the last few weeks.

 

Weekly Market Update 8/11/13

It was a very quiet week for economic reports. ISM Non-Mfg Index beat consensus, while International Trade and Wholesale Trade were a miss. I do not see much to get out of this weeks reports. I will repeat what I have been saying for months. Any economic rebound we are witnessing is myopic at best. This is confirmed by lowered revisions of previously released reports.

The stock indexes finally witnessed a down week. One technical indicator that I have read about repeatedly over the past week is the Hindenburg Omen. If you like you can read about the Hindenburg Omen on Wikipedia. In a nutshell the Omen occurs when there are a significant number of new highs and new lows made on the same day while the underlying Index is either in a uptrend or making new highs. When there are a significant number of stocks making new lows while the index is making new highs it shows the rally is relying on fewer issues to make new highs. Every market crash since 1985 was preceded by the Hindenburg Omen. August and September are two of the most volatile months of the year. We would be wise to be cautious.

 

Weekly Market Update 8/18/13

It looks as though we may be seeing less bad news in the economic reports. This week Import and Export Prices, Producer Price Index, Jobless Claims, and Housing Market Index all beat consensus. While Industrial Production and Consumer Sentiment missed consensus. It is to early to know if this is a new trend but those active in the stock market apparently feel it increases the chances of the Fed tapering their bond purchases.

The stock indexes finally witnessed the sell-off I have been anticipating. Is this the beginning of the move that turns the Long-Term Market Call bearish? It is still to early to tell. We may be due for a bounce. The SPY is now at support near the highs made in May and the 50 day moving average. If the market does attempt a rally from here, the strength of that rally could indicate the markets next move. If the SPY struggles to reach 169, more selling is likely.

 

Weekly Market Update 8/25/13

The economic reports this week might have continued the mild trend I mentioned last week if not for one big miss. New Home Sales were a big miss. With the recent increase in mortgage rates and the decline in mortgage applications somehow this came as a surprise to the economists. Jobless claims missed expectations slightly. On the positive side Existing Home Sales and the KC Fed Manufacturing survey beat their consensus estimates.

The stock market indexes had mixed returns this week. The bounce I was expecting came later in the week than I had expected. For those subscribers following the Long-Term Market Call stay long. If you are longer term in nature this is a low risk point to add to existing long positions with a stop bellow the recent low on the SPY at 164. The Intermediate Term Call remains bearish and is currently at another inflection price. If the intermediate time frame is to remain bearish the current bounce should be rejected some where near 169 on the SPY. A close above 170 on the SPY could move the Intermediate Term Call back to Bullish. So if you are bullish on the stock market for the remainder of the year adding to your positions here is a low risk opportunity. Myself I am a little more cautious on my expectations for the remainder of the year so I will be waiting for my signal that would change the Intermediate Term to bullish before increasing my long exposure.

 


Market Timing – Weekly Stock Market Strategy – July 2013

Posted: August 7th, 2013 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 7/7/13

It seems we are drinking the Kool-Aid again. Many of the headlines I saw regarding the Employment Situation report came across as bullish. “Wall St. gains as jobs data signals stronger economy,” as one example from Reuters. And if anyone just looked at the headline number it would seem as though all is well in Bernakeland. 7.6% unemployment and 195,000 non-farm jobs added. However a deeper look reveals a very different story. From the link below there were 360k part-time jobs added in June while full-time jobs fell by 240k. The part-time number can be very volatile especially during the summer months. However, only 130k full-time jobs have been added during the first half of the year while 557k part-time jobs have been added during the same time. Unfortunately only in the land of government bureaucrats and the Bureau of Labor Statistics does a part-time job equal a full-time job. It appears that once Obamacare goes into full affect even part-time workers working over 24 hours will have to be offered insurance benefits. Previously part-time employees had to average over 30 hours for 6-month to be given benefits, so employers are hiring more part-time employees and less full-time employees. The other economic reports released this week were mixed, PMI Manufacturing Index and ISM Non-Manufacturing Index missed consensus, while Motor Vehicle Sales and ADP Employment beat consensus.

http://blogs.marketwatch.com/capitolreport/2013/07/05/obamacare-to-blame-for-more-part-time-jobs-in-june/

The market movements this week were definitely influenced by the fluid news coming out of Egypt. How much of Fridays rally was based on the headlines of the Employment Report vs Egypt’s president Morsi being placed under arrest is hard to tell. The story out of Egypt is constantly evolving and could likely be overshadowing news at home. Also the relative calm out of Europe may be about to change. This Portugal has witnessed resignations in top post as the populous is becoming tired of austerity measures. Sounds like the same broken record being passed around Europe. All that being said after the recent sell-off we had been expecting a bounce. How big a bounce could be telling for a minimum of the next month. I think it is likely we are within a few days of the peak of this bounce. If the bounce last longer than that it may be necessary to reassess our look at the intermediate term time frame.

 

Weekly Market Update 7/14/13

The economic story of the week centered around Bernanke and the Federal Reserve. After a rough month for the bond and stocks due to fears of reduced asset purchases by the Fed, Bernanke felt compelled to reassure the markets that the Fed’s bond purchases would not be ending anytime soon. This was enough to send the stock and high yield bond markets soaring Thursday. Treasuries not so much. It was a quiet week for economic reports. Jobless claims missed consensus but came in at the high end of the consensus range. July is always a busy month for the Fed chairman. This Wednesday Bernanke speaks to the House Financial Services Committee, and then on Thursday he goes before the Senate Banking Committee. After calming the fears of the market this past week, I would be very surprised if he says anything to spook the markets.

You would think I would have learned by now. Never underestimate how far our leaders will go to maintain the status quo. Despite all the strange goings on in the financial markets the last month or so, a few properly arrange words from the Fed and the stock indexes are at or very near new highs. The irony is Bernanke essentially said the economy is NOT strong enough yet for him to consider changing the Fed’s stimulative policies. Anyway Bernanke’s comments moved the stock market enough that we will need to reverse our recent Intermediate Term Market Call. I do this with a word of caution. I feel like I am being played like a grand piano and will not hesitate to reverse again if the market dictates. Whipsaws, or being forced in and out, can tend to occur when the market enters a consolidation phase. The bigger question is the consolidation forming a market top? Or is this a pause in a larger bull trend? Only time will tell. The intermediate term model has turned bullish. I would like to see a mild sell-off before entering going long.

 

Weekly Market Update 7/21/13

This weeks economic reports was a mixed bag. Retail Sales and Housing starts missed consensus expectations. While The Housing Market Index and Philly Fed Survey both beat consensus. The Empire State Mfg. Survey beat consensus but was within consensus range. So the jobless recovery continues with modest signs of improvement in business while the vast majority of jobs being created tend to be of the part-time variety.

The stock indexes wre mixed this week. Last week saw my Intermediate Term Model signal a return of the bullish trend. The market reversed so quickly that the market became overbought in a relatively short time frame. I have been hopping for a mild pullback for an opportunity to get long and reduce risk at the same time. I am still waiting for that pullback. Two days would be nice. Three would be even better. So watch for a Mid-week Update when the situation improves.

 

Weekly Market Update 7/28/13

Economic reports this week saw no real surprises. Surprises being big reports coming in outside of consensus range. As a whole we are still getting a mixed message. The Chicago Fed National Activity Index, Richmond Fed Manufacturing Index, and Durable Goods excluding transportation all missed consensus estimates. The Richmond Fed report was a big miss. New Home Sales Durable Goods Orders (including transportation), Kansas City Fed Manufacturing Index and Consumer Sentiment all beat consensus but were within consensus range.

The stock market remained flat this past week. We did not see the pullback I was waiting for. The indexes look like they are ready to roll over and I would not be surprised to see a 10% correction between now and the end of 2013. The economy seems to be barely hanging on and waiting for the next piece of economic news to determine its next course of direction. This bull market move is getting a little long. The Fed is still purchasing $85 billion in bonds each month, yet the bond market looks to have entered a long-term bear market. Does that mean the feds ability to drive the market is beginning to wane?

 


Market Timing – Weekly Stock Market Strategy – June 2013

Posted: July 6th, 2013 | Author: | Filed under: Uncategorized | No Comments »

Weekly Market Update 6/2/13

We are still seeing strength in the same economic reports that we have been seeing over the last few months, Housing and Consumer Confidence/Sentiment. The Fed actions seem to be having less of an effect on Jobs and Manufacturing and thankfully inflation still appears to be in check. This week the Home Price Index, Consumer Confidence, Consumer Sentiment and Chicago PMI all beat consensus estimates. Meanwhile the Dallas Fed Survey, Jobless Claims and Personal Income all missed their estimates.

Friday’s market sell-off has put us very close to an inflection point. This means the market will need to find support soon or the sell-off could become more severe. I personally think there is a real possibility the SPY will continue lower to the 161 area. A breach of the 160 could put the Intermediate Term Market Call at risk. The Stock-Bond Model is still firmly on a buy signal. My Volatility Model is creeping toward a caution signal.

Weekly Market Update 6/9/13

The economic reports were a mixed bag this week. The “big daddy” of reports, the Employment Situation, beat consensus estimates with 175,000 new payroll jobs added in May. Although the unemployment rate ticked up to 7.6%. More telling to me was how the average work week remained virtually unchanged. The PMI Manufacturing Index and Motor Vehicle Sales both slightly beat consensus estimates. The Construction Spending Report was a slight miss, while the ISM Manufacturing Index and ADP Employment Report just plain missed. I found it refreshing to hear the President of the Federal Reserve Bank of Dallas, Richard Fisher, refer to current Fed policy as “monetary cocaine.” At least one person gets what might happen when QE infinity comes to an end.

What a difference a day and a half makes. Last week I mentioned I thought the SPY was heading for 161 but a breach of 160 could reverse the Intermediate Term Market Call. Thursday saw the SPY trade down to 160.25 before a rally began that continue into Friday’s close of 164.80. Volatility has picked up and, I think it might be fair to say the market has enter a consolidation phase. I will be very interested to see how the market reacts after another up day or two into the 166 to 168 range. We have seen sellers begin to liquidate in this range. Will we see it again? For now the Intermediate and Long Term Trend remain bullish.

Weekly Market Update 6/16/13

It was a relatively quiet week in terms of economic reports. Small Business Optimism, Jobless Claims and Import Export Prices all beat consensus estimates. Consumer Sentiment missed consensus but was within the consensus range and Industrial Production was a slight miss. Overall the economic reports the last two weeks have surprised in the “less bad” direction. The really good news as I see it is that despite all the Fed’s money printing, inflation is still not a problem.

The U.S. stock market remains in an uptrend. Our Long-Term Market Call and Stock-Bond Model are still firmly in a bull trend. The Intermediate Term Market Call is a little closer to turning bearish. A close below 160 on the SPY might be enough to change the intermediate term picture. We are witnessing increased volatility not just in stocks but currencies and bonds as well. The long term picture in the bond market is extremely close to turning bearish. The US Dollar has sold off rather dramatically (for a currency) the last few weeks. In the past this has been bullish for stocks as foreign investors can buy at a discount. I think what we might be witnessing is the end game of what central banks globally can do. Central Bankers have been flooding the world with liquidity for five years now. Yet we have yet to see any meaningful improvement in economic activity. I think the 22 million unemployed or underemployed Americans might tend to agree. And what might happen when the Fed and other Central Bankers stop the printing presses before the economy can stand on its own. We may be getting close to finding out.

Mid-Week Update 6/20/13

The sell-off in equities started Wednesday after the FOMC Meeting Announcement. What specifically triggered the selling is hard to tell since the Fed really only restated what they had said previously. The obvious problems began in the overnight session when the Chinese Interbank Market ran into obvious liquidity issues as the overnight repo rate surged to 25%. This rate has averaged in the 5-7% range over the last few months. Liquidity issues similar to this happened around the time Lehman collapsed in September 2008.

Technically a few things have happened that have changed the Intermediate Term picture. The SPY opened and closed below the 50-day moving average as well as closing below recent support. We also have the first day of my two day signal that would move my Intermediate Term Market Call to bearish. I had my mental stop on the SPY at 158. However if on Friday the market is trading below today’s close of 159.40 during the final hour of trading I will be exiting the long SPY position. We are still probably 10 points on the SPY from a change in the Long-Term Market Call which is still bullish.

Action: If the SPY is trading below 159.40 after Noon Pacific Time I will exit the long SPY position.

Weekly Market Update 6/23/13

This week saw a bullish showing from the economic reports. The Empire State Manufacturing Survey, Housing Market Index, Existing Home Sales, And Philly Fed Survey all beat consensus estimates. The two manufacturing reports Empire State and Philly Fed Beat consensus by a wide margin. Jobless Claims was the only report this week that missed.

Despite the good news in economic reports this week the stock market sold off. Is that a market tell? I think it speaks volumes and gives me more confidence to say we are probably in for more volatility in the weeks ahead. If you got my Mid-week Update you know my Intermediate Term Market Call Turned Bearish. The two sources I use for data showed different closing prices for Thursday. That does not change anything The QQQ and Dow Transports confirmed the market call. I will be using the low of the final hour of trading in the SPY of 158.83 as my exit price. The Long Term Market Call on the Treasury Bond Market, as tracked by the TLT, is clearly bearish, selling off 4.76% this week. Quite frequently a sell-off in equities will lead to a “flight to quality” and a rally in Treasuries. That is not happening this time and could be one more indication of trouble ahead. It is also why my Stock-Bond Model, usually a fairly reliable signal, has yet to turn bearish. The market is extremely oversold on a short-term basis, and I would not be surprised to see the market rally for a few days. The 150-153 range has a good chance of being our next target on the SPY. This area could act as a inflection point for the long term trend. In other words, a move below 150 could possibly turn the Long Term Market Call bearish.

Weekly Market Update 6/30/13

The economic reports this week continued their bullish bias. The Dallas Fed Survey, Case-Shiller HPI, New Home Sales, Consumer Confidence, Richmond Fed Mfg. Index, Personal Income and Outlays, and Pending Home Sales all beat consensus estimates. GDP, KC Fed Mfg. Index, and Chicago PMI all missed. I think we are witnessing the beginning of a economic slowdown. Some areas will be affected sooner than others. With the recent bump in interest rates I would not be surprised to see a slowdown in the housing markets but that may take a few months to be reflected in the reports. If the stock market has indeed entered a bear market consumer confidence may take a hit. This would likely translate to a reduction in household spending. There is a real possibility that we may not see a return to the labor participation rates we saw prior to 2008. The incredible growth that we have seen over the last several decades has been fueled by debt. On a global basis we may have reached our credit limit and any Fed intervention will have minimal impact.

The stock indexes did manage a rebound from Tuesday to Thursday. The market looks to have met some resistance at the 50 day moving average. This is near the last inflection price area I had mentioned in the 160-161 area, and should act as the first test as to whether the trend has truly changed or not. At the extreme I would be surprised to see the SPY trade back to 165. This was the last short-term peak in prices. There have been no changes in any of the other models I follow.


Market Timing – Weekly Stock Market Strategy – May 2013

Posted: June 15th, 2013 | Author: | Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , , | No Comments »

Weekly Market Update 5/5/13

The unemployment situation was the big report this week. Non-farm payrolls came in adding 165,000 new jobs. This number beat consensus but was within consensus range. The unemployment rate fell from 7.6% to 7.5%. In my opinion these numbers were not near as optimistic as the Fridays market move would have you believe. The numbers behind the numbers paint a slightly different picture. The labor force participation rate, those actually working, remained unchanged at 63.3%. The U-6 unemployment rate, which is a broader measure of unemployment, ticked up to 13.9% from 13.8%. In addition to that, the average work week dropped .2 hours. Sure the headline numbers look decent but, better numbers are needed to suggest a sustainable recovery.

The Dallas Fed Manufacturing Survey, Employment Cost Index, Chicago PMI and Construction Spending all missed this week. Consumer Confidence and Jobless Claims beat consensus expectations.
The reports that can be influenced by the Fed Reserve induced stock market rally seem to be beating consensus. But the numbers that depend on the consumer actually spending money tend to disappoint more often than not. What will happen when the Fed decides to stop printing?

The SPY closed over 161 this week. That is a good sign for further continuation if the SPY can stay above this level. Friday’s opening gap higher was very impressive. Less impressive however was the markets ability to add to the open. The SPY closed near where it opened, unable to get any follow through. Price action early in the week should indicate how sustainable the 160-161 area on the SPY really is. I am raising the stop on the SPY to 155.

Weekly Market Update 5/12/13

Jobless Claims beat expectations again this week. Last weeks number was revised higher but not significantly so. Claims are trending lower but still stubbornly above 300k. This was the only report this week with consensus estimates.

The SPY did a good job of holding the 161 price level this week. The one thing that stood out this week is the continuation of unusual price behavior in various asset classes. The Japanese Yen fell bellow the 100 level and has fallen over 20% in the last 7-months. That is a breath taking move in currencies. On Friday the US treasuries were off almost 2% at one point. 2% moves are relatively rare or at least they used to be in the bond market. The market continues to move higher and our Intermediate Term Market Call is still long. This Fed induced rally is extremely persistent. Do not become overly complacent. There could be some real trouble as soon as the Fed takes their foot of the gas pedal.

Weekly Market Update 5/19/13

The good news this week is inflation seems to be in check. Producer and Consumer prices both came in better than consensus expectations. The big misses this week were related to manufacturing. The Empire State Mfg. Survey and the Philly Fed Survey  both missed consensus expectations. Jobless Claims also jumped rather dramatically this week coming in at 360k vs. an expectation of 330k. Housing Starts missed while Consumer Sentiment beat expectations.

The Fed induced rally continues. The Fed has been buying $85 billion a month in the bond market for quite some time now. Those selling to the Fed have had to put the money to use somewhere. Your average investor has also felt a little safer getting back into the markets. After all if the indices are making new highs everything must be okay. Folks the reality is we just have not had any real market scares. The economy is not making any real progress. The bailout of Cypress was the closest thing we have had to a crisis since the end of the year. Summer is almost here and I would be very surprised if we can make it through without any hiccups. In the meantime stay long and watch for any changes to the Intermediate Term Market Call.

Weekly Market Update 5/26/13

There were not many economic reports this week. Of the few we had they tended to the bullish side. Jobless Claims came in on the low end of consensus range. The House Price Index and New Home Sales both beat consensus estimates. Durable Goods Orders beat consensus but was in consensus range for both New Orders and New Order without Transportation.

The stock market witnessed a pullback Wednesday due to Bernanke comments about the possibility of winding down or reducing the Fed’s bond purchase program. The market is rightfully concerned after all what could possibly sustain this rally if the Fed stopped pumping $80+ billion a month into the markets. The sell-off continued overnight on news that manufacturing activity in China is slowing. Thursday made an impressive rebound from its lower open. The daily and weekly chart formations look very toppy. The stock-bond model I follow is also indicating the stock market may need at least a rest if not a correction. I am moving my stop price level on the SPY to 158.