“The House Ways and Means Committee released “Tax Reform
2.0" Monday night [17 Sep 2018], which would make permanent most of last
year’s tax bill that largely expires in 2025 under current law… “This
is a plan built on quicksand – sinking in the very debt that finances
it. Not only will it add hundreds of billions to the deficit, but it may
actually slow long-term growth, especially if recent spending increases are
also made permanent. The $657 billion score of the plan understates its true
costs, since it is mostly over the final three years. We estimate the
legislation will cost $4 trillion over the next 20 years, or $5 trillion with
interest…Our society is aging, and our largest trust funds and social programs
are running out of money. It’s a fiscal hole in the trillions that isn’t going
to be fixed with more unpaid-for tax cuts.” - Maya MacGuineas, president of the Committee for a
Responsible Federal Budget. Commentary at…
Remember…the Republicans ran for election on a balanced
budget. A balanced budget was the
foundation of the Tea Party. What a bunch
of liars. This is why I dislike
politicians … “You can keep you doctor…you can keep your health plan.” They are
ALL liars!
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“Since that undercut low [February 9, 2018] the SPX is
better by nearly 16% and has left the doubters scratching their collective
heads. More importantly, the equity markets have left many of the “pros”
scrambling to play catch-up and now that the averages have tagged new all-time
highs there should be a rush to commit more cash. While this may not lead to a
vault to the upside (more likely a grind higher) it certainly should contain
any downside, provided there is not a “black swan” news event.” – Jeffery Saut.
Commentary at…
My cmt: The “undercut low he is talking about was a
retest of the prior low. In my case, I called the top, but I couldn’t call the
bottom because the re-test low did not meet my test for market internals. We still came out a couple of % ahead, but we
missed the bottom by about 2-weeks. The
important caution here is to remember that while it is normal for the market to
retest prior lows with an undercut low, many of those retests simply lead to
more selling.
WHEN WILL RATES MATTER? (Real Investment Advice)
“Economic growth has peaked every time rates got this
extended. (Which shouldn’t be a surprise.) Whenever rates have previously
pushed 2-standard deviations of their 2-year moving average – bad things have
tended to occur such as the Crash of 1974, Crash of 1987, Long-Term Capital
Management, Russian Debt Default, Asian Contagion, Dot.com crash, and the
Financial Crisis. While the markets are currently ignoring the risk of higher
rates…we are near the point where “rates will matter.” – Lance Roberts.
Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 slipped about 0.4% to 2919.
-VIX rose about 4% to 12.20.
-The yield on the 10-year Treasury was higher at 3.089%
as of 5PM.
This may be a broken record report, but we still have a
significant warning from the Fosback Hi-Low Logic indicator:
The Fosback high-low Logic indicator is still issuing a
warning for the long-term while the short-term indicator is close to a sell
too. Fosback said this about the one-week version of the indicator: “A
double-digit reading is rare and has nearly always been followed by sharply
declining stock prices.”
We hit a double digit reading on 20 Sept and it remained
so today. In the 7-years that I have data on this indicator, I have only seen
one period when the indicator flashed sell.
That was off and on for an extended period from Dec 2014 until early Feb
2015. The signals were followed by a top in early March that preceded a 12%
correction. The key point is that there was a lead time of more than 2-months
before a significant market drop occurred. We also saw several Hindenburg Omens
in the same time frame. So far, no H.
Omens yet.
Currently, my daily sum of 17 Indicators declined from +7
to +3 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from -10 to -2
indicating that conditions are better than 2-weeks ago.
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…
MONDAY MARKET INTERNALS (NYSE DATA)
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).
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: Monday, the Price indicator was positive; Sentiment, Volume
& VIX were neutral. Overall this is a NEUTRAL indication.
