FOMC MINUTES (FXStreet)
"According to the minutes from the Federal Open Market
Committee's (FOMC) December 10-11 monetary policy meeting, a few
policymakers raised concern that keeping rates low for a long time could
exacerbate imbalances in the financial sector. The publication also showed that
policymakers judged it was appropriate to keep rates steady and
regarded current rate stance as likely to remain appropriate "for a
time." Story at…
CONSTRUCTION SPENDING (Morningstar)
“Spending on construction projects in the U.S. increased
in November, the Commerce Department said Friday…Construction spending rose
0.6% in November from October, to a seasonally adjusted annual rate of $1.324
trillion.” Story at…
ISM MANUFACTURING INDEX (MarketWatch)
“A slump of among American manufacturers deepened in
December as a survey of senior executives showed the weakest performance in
more than 10 years. The Institute for Supply Management said its manufacturing
index slid to 47.2% last month from 48.1% in November, marking the fifth
straight contraction.” Story at…
“The chart below shows the Manufacturing Composite
series, which stretches back to 1948. The eleven recessions during this time
frame are indicated along with the index value the month before the recession
starts.”
Chart and discussion at…
EIA CRUDE INVENTORIES (OilPrice.com)
“Crude oil prices jumped higher today after the Energy
Information Administration reported a
crude oil inventory decline for the last week of 2019. The draw totaled an
impressive 11.5 million barrels…At 429.9 million barrels, U.S. crude oil
inventories are at the five-year seasonal average.” Story at…
SHILLER PE / CRESTMONT AT EXTREME (Advisor Perspective)
The following charts shows “…the historic Crestmont P/E
ratio (similar to the Shiller 10-year PE) from its mean (average)…with callouts
for peaks and troughs along with the latest values."
Chart and commentary at…
Crestmont PE is similar to the Shiller PE10 that “…uses
the actual reported earnings per share for the S&P 500 Index over trailing
forty quarters (i.e., ten years). The quarterly EPS data is then interpolated to
monthly values. Each value in the series is adjusted to today's dollars by
historical inflation (i.e., into real terms).” The Crestmont version makes
adjustments to the Earnings side of the equation using a relationship between
GDP and earnings.
The current PE for the S&P 500 is 24.4; the S&P
500 PE ratio was 32.9 on 1 Jan 1999. On a standard PE basis, we see that the PE
has not yet reached extreme levels seen before the dot.com crash.
THRIFT SAVINGS PLAN FOR GOVERNMENT EMPLOYEES AND MILITARY
Here’s info on TSP changes…
BTW…
There is a TSP discussion board on Investor Hub. There
are not many participants and no trolls. I post there occasionally. Here’s the link…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.7% to 3235.
-VIX rose about 12% to 14.02.
-The yield on the 10-year Treasury dropped to 1.789.
I did take a small short position in a 2x Inverse S&P
fund similar to SDS. There are enough signs of a pullback that it seems like a
reasonable bet. I think the top was 2
Jan. That’s not a major top; we expect a
modest 3-5% pullback. The big counter to that position is that the Fed is
buying Treasuries. The FED says it isn’t
Quantitative Easing, but most feel that what they are doing is the same thing. During
QE some of my bear indicator signals didn’t work. That may happen again, so I’ll
hold a tight stop and limit losses by selling if the market keeps going up.
Volume was “normal”. Today’s Volume was in line with the
average volume over the last month. Perhaps everyone is back to work.
My MACD of Breadth is bearish today. MACD of S&P 500 price is close to
bearish, but at the moment, it is still in bull territory.
My daily sum of 20 Indicators declined from -1 to
-4 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations declined from +3 to -4
(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.
I remain bullish in the long-term; short-term - it looks
like we are in for a bit of a pullback. End of the month and the first days of
a new month are usually strong due to 401k automatic inflows. Next week we’ll find out if the market agrees
with my assessment.
Any pullback should be small: there were a decent number
of new-highs when the S&P 500 made its all-time high today; the Fosback
New-High/New-Low Logic Index remains much closer to a buy than a sell.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2
Most Recent Day with a value other than Zero: -2 on 3
January (Divergence between Breadth and the S&P 500 is bearish; and the
S&P 500 is too far above its 200-dMA when sentiment is considered.
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher 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.
For more details, see NTSM Page at…
FRIDAY MARKET INTERNALS (NYSE DATA)
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 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
Thursday, the PRICE indicator was Bullish; VIX,
VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator
remained to HOLD. At present, I expect a small pullback so we are
looking for a better buying opportunity.
