“Tax cuts and federal spending are adding fuel to the
already strong economy, putting the United States on a pace for its best year
of growth in well over a decade. The Commerce Department reported Friday that gross domestic product, the broadest
measure of goods and services produced in the economy, grew at a 4.1 percent
rate in the second quarter of the year.” Story at…
My cmt: Ok, but
an overheating economy is not necessarily great news for the stock market since
it raises the likelihood that the FED will raise interest rates at a faster
pace. That’s not a prediction – just a warning. We’ll need to pay attention.
MICHIGAN SENTIMENT (WSJ)
“Trade concerns slightly dimmed U.S. consumers’ outlook
on the economy in July.
The University of Michigan said Friday its index of
consumer sentiment was 97.9 this
month, down from June’s final reading of 98.2.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dipped about 0.7% to 2819.
-VIX rose about 7% to 13.03.
-The yield on the 10-year Treasury dipped to 2.955%.
My daily sum of 17 Indicators slipped from +3 to -1 while
the 10-day smoothed version that negates the daily fluctuations slipped from
-14 to -18, indicating that conditions in the market are slightly worse than
2-weeks ago.
There are a couple of strong bullish signs. Cyclical
Industrial stocks (XLI-ETF) have been outperforming the S&P 500 over the
most recent 10 and 20-day period and the S&P 500 has been outperforming Utilities
recently too. If investors were worried,
the results would be reversed. Add that Smart Money is moving up, and we have
to conclude that most investors think this market is going higher. Advancing
volume has bounced up. Breadth vs. the S&P 500 is bullish.
I don’t see a lot of bearish indicators. One is the statistical analysis of the
S&P 500 daily fluctuations. The
daily swings are very small and that can be a bearish sign, but VIX has not
dropped into the critical low are that it was back last January. The 5-day,
%-bulls value (Sentiment) is 85% and that’s well below the 91% peak during the recent
January-February 10% correction. Bottom
line, sentiment is not suggesting a top now either, so I think we go higher too.
Of course, higher is not always in a straight line.
I remain fully invested.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the 4-months
from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed
the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked in the top 3
Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.)
XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
Intel took a huge hit today, dropping 8.6% due to trade
war/tariff concerns. I suspect this is overblown. Intel has a PE of 21 (vs. 23
for the Dow 30) and a Dividend yield of 2.3%...seems like a value buy to me. As
shown above, it ranks 21st in the Dow 30 momentum trading system and
that’s not good.
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).
18 Apr 2018 I
increased stock investments from 35% to 50% based on the Intermediate/Long-Term
Indicator that turned positive on the 17th. (It has since turned Neutral.) For
me, fully invested is a balanced 50% stock portfolio. 50% is my minimum unless
I am in full defense mode.
On 10 May 2018 I
added stock positions to increase Stock investments to 58% based on more
evidence that the correction is over. This is high for me given that we are
late in this cycle (and as a retiree), but it indicates my bullishness after
the correction. I’ll sell these new positions quickly if the market turns down.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Friday, the Price indicator was positive; Volume, VIX &
Sentiment indicators were neutral. Overall this is a NEUTRAL indication.
