MICHIGAN CONSUMER SENTIMENT (CNBC)
“Consumer sentiment ticked slightly higher in early July,
largely unchanged from June, according to data released Friday. The University
of Michigan’s preliminary print on its consumer sentiment index ticked up to
98.4…” Story at…
COMPANIES PULL MANUFACTURING FROM CHINA (msn.com)
“More than 50 multinational corporations have announced
plans to move manufacturing out of China, or are considering to do so,
according to reporting from the Nikkei Asian Review. Apple, Google,
Nintendo and Dell, among others, are trying to avoid the import penalties on
$250 billion in Chinese goods.” Story at…
The article noted that the companies are moving
production to other Southeast Asian companies rather than the US. This may not
help American manufacturing, as Trump had hoped, but it does put pressure on
the Chinese to negotiate. My guess is that they may try and wait out Trump,
i.e., constant delays until after the elections.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.6% to 2977.
-VIX rose about 7% to 14.45.
-The yield on the 10-year Treasury rose to 2.055%.
Late Day Action, the so-called Smart Money, was down today. On a longer-term basis, it has been generally
up over the last month, but it peaked yesterday. On a percentage basis, the
Smart Money has been less bullish than the market for over a month.
The S&P 500 has been down 3 out of the last 4 days. There’s
always a bit of angst when the market is falling, however, the S&P 500 is
only down 1.2% since the recent high on Monday (15 July) so there’s no need to panic
yet.
Today was another statistically-significant day. That
just means that the price-volume move exceeded my statistical parameters.
Statistics show that a statistically significant down-day is followed by an
up-day about 60% of the time. This is the second one this week and I would be
tempted to suggest that this pullback may not have much further to go, but
unfortunately, there are some signals that suggest more trouble ahead.
I previously mentioned a divergence between the
advance-decline line vs the S&P 500. It has not gotten worse, but it hasn’t
improved much either. This is a pretty good top indicator.
My daily sum of 20 Indicators improved from -6 to -2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations slipped from +22 to +21. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
It still looks like we are headed for a pullback, but I’m
guessing it won’t be too dramatic. I don’t like to guess, so we’ll just have to
watch the indicators. If signals keep
heading down, I’ll be cutting stock holdings.
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 15
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
We haven’t got any top-indicators calling sell now,
but we must remember that these indicators don’t always signal a top. They are best when the market climbs to a
blow-off top. We often have a top without the indicators signaling one.
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
(INTC) has been the best performer in the Dow over the last 2 months. It may be
a stock to consider after we figure out where this correction is going.
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
Friday, the PRICE indicator was positive; the SENTIMENT,
VIX and VOLUME indicators were neutral. Overall, the Long-Term Indicator remained
Neutral/HOLD.
