FED BEIGE BOOK (San Diego Tribune)
“The U.S. economy was expanding at a modest pace in
September and into October despite the fact manufacturing was being hurt by
rising trade tensions and weaker global growth while adverse weather was
affecting farmers.” Story at…
RETAIL SALES (Reuters)
“U.S. retail sales fell for the first time in seven
months in September, suggesting that manufacturing-led weakness could be
spreading to the broader economy, keeping the door open for the Federal Reserve
to cut interest rates again later this month…Retail sales dropped 0.3% last
month…” Story at…
VALUATION (Advisor Perspectives)
This chart is the the Wilshire 5000 Full Cap Price Index
divided by GDP from D. Short.com.
My cmt: This is a variant of Warren Buffet’s favorite
valuation indicator. The chart speks for itself; valuations are high.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 slipped about 0.2% to 2990.
-VIX rose about 1% to 13.68.
-The yield on the 10-year Treasury was 1.774.
My daily sum of 20 Indicators improved from +4 to
+6 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations rose from -49 to -31.
(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.
The overbought / oversold ratio switched to “overbought”
today based on breadth measures of advance-decline numbers. This indicator is
an old one and is always very early to make an overbought call. I will ignore it for now. Most indicators are
bullish while topping indicators are all neutral.
Retail sales is a concern (see above article), so we’ll need
to pay close attention to the markets. We know manufacturing is slipping. If the consumer is also faltering, recession
is coming – we just don’t know how soon.
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: +2 on 3
October.
(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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
POSITIVE 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 60% invested in
stocks as of 7 Oct 2019 (up from 50%). This is a conservative balanced position
appropriate for a retiree. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the VIX and VOLUME
indicators were positive; PRICE and SENTIMENT Indicators were neutral. Overall,
the Long-Term Indicator improved to BUY.
