“The Conference Board Leading Economic Index® (LEI)for
the U.S. increased 0.6 percent in July to 110.7 (2016 = 100), following a 0.5
percent increase in June, and a 0.1 percent increase in May. “The U.S. LEI
increased in July, suggesting the US economy will continue expanding at a solid
pace for the remainder of this year,” said Ataman Ozyildirim, Director of
Business Cycles and Growth Research at The Conference Board. “The strengths
among the components of the leading index were very widespread, with
unemployment claims, the financial components, and the ISM® New Orders Index
making the largest positive contributions.” – Press release at…
“U.S. consumer sentiment fell to an 11-month low in early
August, with households expressing concerns about the rising cost of living,
potentially signaling a slowdown in consumer spending.” Story at…
THE NEXT BEAR MARKET (MarketWatch – 9 Feb 2018)
“’When we have a bear market again, and we are going to
have a bear market again, it will be the worst in our lifetime.’ - Jim Rogers. That’s what
the chairman of Rogers Holdings Inc. told Bloomberg News on Thursday.” Old story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.3% to 2850.
-VIX dropped about 6% to 12.64.
-The yield on the 10-year Treasury slipped to 2.859%.
About 20-years ago I used to watch Jimmy Rogers on CNBC arguing
the contrarian, bear-side as the stock market ran up to the dot.com bubble
top. Every week Jimmy was on the show
talking about the coming crash and saying that people should be short or invest
in gold, or out of the market and so on.
One day Sue Herrera asked him how he could stay out of the market during
this tremendous run up. He said, “Oh I’m not out of the market. You’d have to
be crazy to miss this even if you can’t believe it will last” or words to that affect. That was the last time Jimmy Rogers was on
CNBC arguing the bear side. The irony is that CNBC asked Jimmy Rogers to take the
bear side of the argument – he just wasn’t a true bear at the time.
I bring this up just to point out why I don’t pay any
attention to investor surveys – people will say one thing and do another. For that reason, the only sentiment indicators
I follow need to be based on where investors are putting their money. I use the Guggenheim/Rydex long short funds
to calculate a %-bulls {bulls/(bulls+bears)} based on how much money is bet on
the Rydex long/short mutual funds. It’s
a clean number because the closing data is published daily. That’s my sentiment
indicator. Because investors will change their attitude based on market
conditions Sentiment tends to rise the farther one gets from the last
crash. For that reason, to develop a
Sentiment indicator, I use a multiple of std-deviations from a mean of values
present during the dot.com bubble.
Friday, the Sentiment indicator flashed “sell” because
the Sentiment is now higher than it was during the dot.com bubble, at least on
a standard deviation basis.
The last time we got a sentiment sell-signal was 1 Feb of
this year during the 10% drop. However, more often than not, Sentiment alone
does not indicate a top because sentiment can remain elevated for an extended
time or drop without a correction in stock price. For that reason, we can’t trade sentiment
alone. Sentiment sets the stage, but we’d need to see more negative signs
before a correction is likely.
Bollinger Bands on the S&P 500 index are again exhibiting
a “Squeeze” Friday (top and bottom bands are close together) suggesting a breakout
(up or down) is coming. The Index is now much closer to the upper band
suggesting that the break is likely to be down.
We need to see confirmation by RSI, but RSI is still solidly neutral so
no need to panic yet.
My guess is that the Index will continue up for a while
longer before some more alarm bells warn of a correction. Late summer and early fall are not good times
for the stock market.
The S&P 500 is less than 1% below the January 2017 high.
The Index could make new highs, but it’s questionable how much farther it can
go. We’ll just keep an eye on the
indicators.
Currently, my daily sum of 17 Indicators improved from -3
to -2 (a minus number is bearish) while the 10-day smoothed version that
negates the daily fluctuations dropped from -30 to -37.
I remain fully invested…at least until we see some more
signs of trouble.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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).
I am now 50% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio. As a retiree, this is a position with which
I am comfortable unless I am in full defense mode or feeling especially
optimistic.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Friday, the Price indicator was positive; Volume & VIX indicators were neutral; Sentiment was
bearish. Overall this is still a NEUTRAL indication.
