Friday, July 30, 2021

Personal Income ... Personal Spending ... PCE Prices ... Chicago PMI ... Michigan Sentiment … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“People always ask me what is going on in the markets. It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude.” – Michael “Big Short” Burry.

 

“Inflation is not going to be transitory; I’ve been pretty certain in my mind about three prior calls. This is the fourth one.” - Mohamed El-Erian, Chief economic adviser at Allianz SE

PERSONAL INCOME / SPENDING (US News)

“Americans spent 1% more in June, as they took advantage of flush savings and frequented restaurants, stores and attractions, the Commerce Department reported on Friday. Personal income also was higher, up 0.1%, driven by an increase in wages as companies find it necessary to pay more to keep or hire workers.” Story at...

https://www.usnews.com/news/economy/articles/2021-07-30/higher-wages-drove-personal-income-in-june-as-consumers-spent-heavily

 

PCE PRICES (Reuters)

“The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.4% in June after advancing 0.5% in May. In the 12 months through June, the so-called core PCE price index shot up 3.5%, the largest gain since December 1991.” [This is the FED's favorite inflation stat.] Story at...

https://www.reuters.com/article/us-usa-economy-spending-idUSKBN2F01TA

 

CHICAGO PMI (MarketWatch)

“A measure of business conditions in the Chicago region showed the area’s economy surged again in July, with businesses trying to pump out goods and services as fast as they can. The Chicago Business Barometer, also known as the Chicago PMI, rose to 73.4 in July...” Story at...

https://www.marketwatch.com/story/chicago-pmi-shows-regions-supercharged-economy-still-growing-rapidly-11627655309

 

UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)

“Consumer sentiment edged upward at the end of July, although it still posted a monthly decline of 5.0%. The largest monthly declines remained concentrated in the outlook for the national economy and complaints about high prices for homes, vehicles, and household durables. While most consumers still expect inflation to be transitory, there is growing evidence that an inflation storm is likely to develop on the not too distant horizon.” Press release at... 

http://www.sca.isr.umich.edu/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5:00 PM Friday. US total case numbers are on the left axis; daily numbers are on the right side of the graph with the 10-dMA of daily numbers in Green.


MARKET REPORT / ANALYSIS

-Friday the S&P 500 dropped about 0.5% to 4395.

-VIX rose about 2% to 18.03.

-The yield on the 10-year Treasury slipped to 1.228%.

 

We may have seen some technical selling at the end of the month as mangers “window dress” their portfolios. That’s my guess, but who knows? Futures were down last night so we can’t blame today’s down-day on the poor inflation numbers. It doesn’t really matter and it is somewhat pointless to try and guess even though the financial press always has a reason for daily results in the markets. The good news is that indicators improved.

 

Here’s Friday’s run-down of some important indicators. These tend to be both long-term and short-term, so they are somewhat different than the 20 that I report on daily.

 

BULL SIGNS

-The 10-dMA of issues advancing on the NYSE (Breadth) is above 50%.

-The 50-dMA % of issues advancing on the NYSE (Breadth) is above 50%.

-The 100-dMA of the % of issues advancing on the NYSE (Breadth) is above 50%.

-The smoothed advancing volume on the NYSE is rising.

-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are both above the 20-dEMA. 

-My Money Trend indicator.

-MACD of the percentage of issues advancing on the NYSE (breadth) made a bullish crossover 16 July.

-MACD of S&P 500 price made a bullish crossover, 26 July.

-Short-term new-high/new-low data is rising.

-The S&P 500 is out-performing the Utilities ETF (XLU), and trending higher.

-61% of the 15-ETFs that I track have been up over the last 10-days.

 

NEUTRAL

-Distribution Days.

-Bollinger Bands

-RSI.

-Statistically, the S&P 500 gave a panic-signal, 18 June, but the signal has expired.

-Non-crash Sentiment indicator remains neutral, but it is very bullish and that means the signal is leaning bearish.

-3.7% of all issues traded on the NYSE made new, 52-week highs when the S&P 500 made a new all-time-high today, 26 July. (There is no bullish signal for this indicator.) This is well below average, but not quite low enough to send a bear signal – something to watch.

-The Fosback High-Low Logic Index is neutral.

-There have been 13 up-days over the last 20 days. Neutral

-There have been 7 up-days over the last 10-days.

-The size of up-moves has been smaller than the size of down-moves over the last month, but not enough to give a signal.

-VIX.

-Overbought/Oversold Index (Advance/Decline Ratio) is neutral.

-29 July, the 52-week, New-high/new-low ratio improved by 0.4 standard deviations, somewhat bullish, but neutral.

-McClellan Oscillator is bullish.

-The S&P 500 is 11.7% above its 200-dMA (Bear indicator is 12%.). This value was 15.9% above the 200-dMA when the 10% correction occurred in Sep 2020.

-There have been 3 Statistically-Significant days in the last 15-days. This can be a bull or bear signal. 3 is neutral. 

 

BEAR SIGNS

-Breadth on the NYSE compared to the S&P 500 index is bearish.

-Long-term new-high/new-low data is falling.

-Slope of the 40-dMA of New-highs is falling. This is one of my favorite trend indicators.

-Cyclical Industrials (XLI-ETF) are under-performing the S&P 500 - bearish.

-The Smart Money (late-day action) is headed down. (This indicator is based on the Smart Money Indicator developed by Don Hayes).

 

On Friday, 21 February, 2 days after the top of the Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 5 bear-signs and 11 bull-signs. Last week, there were 12 bear-signs and 8 bull-signs.

 

Today’s Friday count looks a lot more bullish than last Friday.

 

The daily sum of 20 Indicators improved from -3 to -1 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations improved from -64 to -55. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term and many are trend following.

 

The Short-term, market-internals ensemble indicator remained POSITIVE/BULLISH.

 

The Long Term NTSM indicator remained HOLD. Volume, VIX, Price & Sentiment are neutral.

 

I am bullish, but with caution; I still think there is a correction coming. But, I am reminded that the key is to trade what we see; not what we think.  I see more bullish indications.

 

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.

*For additional background on the ETF ranking system see NTSM Page at…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

Here’s the revised DOW 30 and its momentum analysis. 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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

FRIDAY 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. 

 

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 stock-allocation is about 50% invested in stocks. I am not super bullish (or bearish) and I am watching the markets closely.

 

You may wish to have a higher or lower % invested in stocks depending on your risk tolerance. 50% is a conservative position that I consider fully invested for most retirees. As a retiree, 50% in the stock market is about fully invested for me – it is a cautious and conservative number. If I feel very confident, I might go to 60%; if a correction is deep enough, and I can call a bottom, 80% would not be out of the question.