I made a few corrections to last Friday’s blog when the
numbers changed a bit after 4:15.
Changes did not affect the overall conclusions.
CHICAGO PMI (MarketWatch)
“A measure of business conditions in the Chicago region
contracted for the third time in four months, reflecting ongoing struggles by
American manufacturers as well as the two-week-old General Motors workers
strike. The Chicago PMI business barometer dropped to 47.1 in September from
50.4 in the prior month…Any reading below 50 indicates
worsening conditions.” Story at…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“Positive seasonality should help the equity market be
‘all right,’ as the fourth quarter has historically been the best quarter of
the year. Over the last 30 years, the S&P 500 has been up 4.8%, on average,
in the final quarter, and has been positive 80% of the time. On a longer-term
basis, seasonality within the presidential cycle should also be supportive of
the equity market. Since 1929, the S&P 500 has had an average return of
~11% in a president’s fourth year, and is positive 91% of the time. Supportive
seasonality should help propel the S&P 500 to 3,122 over the next 12
months.” – Larry James, CIO. Story at…
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“So far, the threat of impeachment has had no effect on
stock prices. And unless a “smoking gun” appears and Senate Republicans begin
to jump ship, I continue to believe that the stock market will proceed higher
to Dow 28,000 and perhaps 30,000 in Q1 2020. Impeachment makes for sensational
headlines, drives people to the media and creates an even bigger country
divide, but I believe this will be the third time [for impeachment] without
market impact.” - PAUL SCHATZ, PRESIDENT, HERITAGE CAPITAL. Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.5% to 2977.
-VIX dipped about 6% to 16.24.
-The yield on the 10-year Treasury dipped to 1.667.
Checking the 3-month chart we note that it is easy to
draw the top trend-line with some confidence; it is now about 3110. That would
make the bottom trend line about 2960 or possibly 2950 (the 50-dMA). In fact, 2960 is where the S&P 500 closed
Friday. So, if we have returned to a “normal” non-correction market, the Index was
sitting on or near the lower trend line on Friday. We can conclude that the markets should go
higher; if they don’t, this is not a “normal” market. Stated simply, we need to
see the Index move higher to confirm the uptrend. Should we see consecutive closes below trend
(or a 3% break lower), we can conclude that the markets are in a downtrend.
That would signal a likely retest the 2840 lows of August, or perhaps even
lower lows.
Today we saw upward movement so that’s a good sign.
My daily sum of 20 Indicators improved from +1 to +5
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations remained minus 1. (These
numbers sometimes change after I post the blog based on data that comes in
late.) A reminder: Most of these indicators are short-term.
RSI bounced up to a Neutral indication. Bollinger Bands
are neutral as well. Smart Money is still turning up, but not very sharply
since there was late-day selling today.
Overall, we are not out of the woods yet, but there were
improvements in the short-term indicators and that’s a bullish sign.
I probably won’t make any drastic investment changes
unless I get a sell-signal from the long-term indicator.
I remain bullish. I still think we go up from here;
the short-term indicators seem to agree since they improved to neutral. Now, let's see if they will turn positive.
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 23
September.
(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)
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 improved
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 50% invested in
stocks as of 27 Sept 2019 (down from 55%). This is a conservative balanced
position appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE indicator is
Bullish; VOLUME, VIX and SENTIMENT Indicators were neutral. Overall, the
Long-Term Indicator remained HOLD.
