DOUBLE DIGIT CORRECTION WITHIN 6-MONTHS (CNBC)
“The S&P 500 rallied by more than 17% in the first
six months of the year, the 10th time in the past seven decades that it
has gained by more than 15% over that stretch. In those years, the index has
pulled back an average 12.1% in the second half, and by as much as 34% during
the market crash of 1987.” Commentary at…
My cmt: This sort of stat is wonderfully researched and
certainly scary. Is it true? Well, yes,
the market is up more than 17% this year, but the analysis ignores an important
part of the picture. The markets were
coming off a 20% correction-bottom in 2018, just 4 trading-days before the
start of 2019; therefore, I doubt that the past history cited in this article
is appropriate for a 2019 comparison. I will ignore it.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.5% to 2976.
-VIX rose about 5% to 13.96.
-The yield on the 10-year Treasury rose to 2.050%.
My daily sum of 20 Indicators improved from -1 to +3 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -4 to +1. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
The drop over the last 2 trading-sessions serves to reset
the market and that will allow the market to eventually move higher. For example,
Bollinger bands, RSI and the Advance Decline Ratio are all in neutral
territory. Previously, they were bearish or very close to it.
I remain bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 3
July (Bollinger Band, top-indicator was bearish.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*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 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).
Using the Short-term indicator in 2018 in SPY would have
made a 5% gain instead of a 6% loss for buy-and-hold. The methodology was Buy
on a POSITIVE indication and Sell on a NEGATIVE indication and stay out until
the next POSITIVE indication. The back-test included 13-buys and 13-sells, or a
trade every 2-weeks on average.
My current stock allocation is about 55% invested in
stocks as of 4 June 2019. This is based on the improved indicators 3 June and
my recommendation to increase stock holdings if we saw strong buying on 4 June.
As a retiree, I am conservatively positioned with a balanced portfolio. You may be comfortable with a higher % invested
in stocks – that’s OK.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE and VIX indicators were positive; the
SENTIMENT and VOLUME indicators were neutral. Overall the Long-Term Indicator
remained BULLISH.
