“The University of Michigan Consumer Sentiment Index
increased to 82.5 in its final reading for June…up from 81.9 in May…Consumer
sentiment has little influence on consumption. As long as payroll levels
continue to expand, the resulting income growth should keep consumption gains
steady regardless of the monthly ebbs and flows in sentiment.” Charts and
details at…
https://www.briefing.com/Investor/Calendars/Economic/Releases/mich.htm
PROFITS STARTING TO CRACK? DUPONT’S REDUCED OUTLOOK
“DuPont declined
after the chemicals supplier reduced its
operating profit outlook for the second quarter and full year. In
midday trading Friday, the news dragged on the stock market at-large, too.
"I am concerned, and I've expressed this opinion before that record profit
margins are going to begin to revert to the mean," Cashin, director of
floor operations at the NYSE for UBS, said on CNBC's "Squawk on the Street." "And
unfortunately, this upcoming quarter may begin to show some signs of
that…" Video at…http://www.cnbc.com/id/101795780
CMT: This has been a recurrent theme for John Hussman, PhD, (Hussman Funds) who has been writing about a profit mean-reversion for more than a year along with many others. With corporate profits at a record high (by many measures) it is hard to see how this can continue. When will they break? Perhaps not too much longer.
YIELDS COULD FALL 20% (Chris Kimble)
“The yield on the 10-year note and 30-year bell weather bond look to be creating head & shoulders tops. The 30-year yield…looks to have broken its neckline and continues to decline inside of a falling channel since the start of 2014.” I won’t try to summarize the piece further. See Doug Shorts website for commentary and charts at…
http://www.advisorperspectives.com/dshort/guest/Chris-Kimble-140627-Joe-Friday.php
CMT: Why would yields crash when most are predicting that yields will rise? The bond market looks like it is warning of real trouble ahead for the stock market and the economy. Many suggest the falling yields are due to demand from overseas and are not a concern. I disagree. If the world’s economy is headed for the toilet (and that’s what overseas demand for US bonds may indicate), the US won’t be unscathed. That isn’t a call for panic though. I remain fully invested.
MARKET REPORT
Friday, the S&P 500 was up 0.2% to 1961 (rounded).
Volume was more than twice normal and this was attributed
to portfolio-rebalancing at the end of the month.
VIX fell about 3% to 11.26.
Ghouls are still not
convinced that happy days are here again.
CORRECTION WATCH
RSI rose to a neutral 65 (70 is overbought). The
Percentage of Stocks above their 200-dMA fell to 63% Thursday (data is a day
late); 61% is the trouble point for that stat.
The S&P 500 is 7.5% above the 200-dMA and 10% above the 200-day is
the trouble point for that one. Chart wise, the index can still move up. Sentiment also has some head room before it
turns negative, although sentiment is so high it is hard to be sanguine about
sentiment. All-in-all though, it still
looks like the index has room to move up a bit more, barring unforeseen bad
news.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) climbed to 58% at the close Friday. (A number above 50% for the 10-day average is
generally good news for the market.)
New-highs outpaced New-lows Friday. The spread (new-highs minus new-lows) was +195.
(It was +125 Thursday.) The 10-day moving average of change in the spread rose
to +12. In other words, over the last 10-days, on
average, the spread has INCREASED by 12 each day. The smoothed 10-dMA of up-volume
was UP today and the Internals switched to positive 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 2013, using these internals alone would have made a 16% return vs. 30% for the S&P 500 (in on Positive out on Negative – no shorting). Of course, few trend-following systems will do well in an extreme low-volatility, straight-up year like 2013.
NTSM
The NTSM analytical model for LONG-TERM MONEY remained
HOLD Friday. Sentiment rose to 78%-bulls
(5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim
funds at the close on Thursday (data is a day late). This value was 85%-bulls
on 19 May. Sentiment, Volume & VIX indicators are all neutral. The Price
indicator remains positive because up-moves have been larger than down-moves
recently.
MY INVESTED POSITION
I increased my stock allocation to 50% invested in stocks on 26 March because of the NTSM indicators turned positive 24 Mar at the close. 50% in stocks is fully invested for me, given my age (semi-retired) and the risk inherent in today’s stock market. I am watching closely to see if it is time to reduce my long-term stock holdings.
--INDIVIDUAL STOCKS--
ENSCO (ESV): BUY (Earnings announce 28 July)
The chart looks OK with higher lows and it made a higher high on the 1-month chart so I again rate ESV as BUY. It doesn’t hurt that it was upgraded to Buy on 27 May by The Street.com. For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
DISECTING ENSCO’S…FLEET STATUS REPORTS (Motley Fool)
“Overall, the recent fleet updates from both Ensco and Diamond show that the offshore drilling market remains under pressure.” For the commentary/analysis, see…
http://www.fool.com/investing/general/2014/06/24/dissecting-enscos-and-diamonds-recent-fleet-status.aspx
