“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. declined 0.1 percent in September to 111.9 (2016 = 100), following a
0.2 percent decline in August, and a 0.4 percent increase in July. “The US LEI
declined in September because of weaknesses in the manufacturing sector and the
interest rate spread which were only partially offset by rising stock prices
and a positive contribution from the Leading Credit Index,” said Ataman
Ozyildirim, Senior Director of Economic Research at The Conference Board. “The
LEI reflects uncertainty in the outlook and falling business expectations,
brought on by the downturn in the industrial sector and trade disputes. Looking
ahead, the LEI is consistent with an economy that is still growing, albeit more
slowly, through the end of the year and into 2020.” Press release at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 slipped about 0.4% to 2986.
-VIX rose about 3% to 14.25.
-The yield on the 10-year Treasury was little changed at
1.753.
My daily sum of 20 Indicators slipped from +7 to +2
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations rose from -13 to -2 (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.
We continue to see late-day selling over the last month
and again today. In theory, that’s when
the Pros trade and this indicator is quite negative. This is disconcerting
since I am bullish, while the Pros are bearish. The last time I saw numbers
this bearish was early in the 20% correction that started in the fall of 2018.
I’ll keep an eye on the indicators.
The overbought / oversold index switched to neutral today. That was the first overbought signal we had
seen, but no longer. It is based on advance-decline numbers.
In spite of a few negatives, I remain very bullish for
the time being.
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 ITA-ETF took a hit today because Boeing is a big
holding of the fund and it was down more than 6%.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals slipped
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 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
Friday, the PRICE indicator was
positive; VIX, VOLUME and SENTIMENT Indicators were neutral. Overall, the
Long-Term Indicator remained HOLD.
