PAYROLL REPORT (CNBC)
“The Labor Department reports that payrolls increased
164,000 during July, just 1,000 below the 165,000 Dow Jones forecast.” Story
at…
FACTORY ORDERS (Reuters)
“Factory goods orders increased 0.6%, boosted by demand
for machinery and transportation equipment, the Commerce Department said on
Friday. Data for May was revised down to show factory orders falling 1.3%
instead of dropping 0.7% as previously reported.” Story at…
MICHIGAN SENTIMENT (Bloomberg)
“U.S. consumer sentiment held steady in July near
historically elevated levels while expectations improved in the later part of
the month as a strong labor market helped to offset worries about slower global
growth and trade tensions. The University of Michigan's final sentiment index
held at 98.4…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.7% to 2932.
-VIX dipped about 1% to 17.61. (A little surprise here –
the Options Boys are not convinced there is a correction coming.)
-The yield on the 10-year Treasury slipped to 1.846%.
Today, the S&P 500 broke below its 50-day moving
average (50-dMA) of 2927, but recovered enough to close slightly higher than
the 50-day. The 200-dMA is now 2790 and
that is a point that might provide a stopping point for this pullback should it
continue.
Breadth vs the S&P 500 is still giving a bearish Top-signal.
Too many issues are declining for us to feel too bullish. This suggests this
downturn is not over yet.
The Fosback New-Hi/New-low Logic Index is now giving its
highest (most bearish) readings since the last correction – although it has not
reached the threshold for a clear-cut sell signal. We remember that this was the indicator that
called the top of the 2018-19% correction to the day. There were 164 new-lows
today along with 152 new-highs. When new-highs and new-lows are both high, it is
not generally a sign of a healthy market and certainly not when new-lows are
exceeding new-highs.
The 5-10-20 Timer system remained Neutral, but is now
only slightly above a sell
signal. This is a
simple timing model: When the 5-dEMA and the 10-dEMA are both below the 20-dEMA,
“SELL”.
Overall, my daily sum of 20 Indicators slipped from -4 to
-10 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations declined from -3 to -11.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
My MACD (Moving Average, Convergence, Divergence) analysis
of Breadth turned bearish today. On the
surface, this indicator looks very good, but like all of them, it can give bad
signals sometimes. A separate MACD indicator, MACD of S&P 500 price, has
been bearish for almost 3-weeks.
My Money Trend indicator is no longer signaling a top,
but it has turned negative.
Bollinger Bands are now “oversold”, but we must remember
they can remain oversold for a long time.
RSI was 32, a whisker above a “Buy” in my system, but it
would take more than one signal to make us convinced of a bullish scenario.
I’ll be watching indicators for clues about this
pullback. It wouldn’t take much to convince me to cut some stock holdings. The 50dMA is important. If it can hold, perhaps we’ve seen the worst.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
- Bollinger Bands were positive; Breadth vs the S&P
500 was negative.
- Most Recent Day with a value other than Zero: -2 on 31
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator; the S&P 500 was stretched relative to breadth.)
(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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
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).
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. I may be reducing stock holdings soon based on
deteriorating indicators.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the PRICE, SENTIMENT, VIX and VOLUME indicators
were neutral. Overall, the Long-Term Indicator is HOLD.
