“U.S. producer prices barely rose in April after strong
gains in the first quarter, held down by a moderation in the cost of both goods
and services, which could ease fears that inflation pressures were rapidly
building up…The Labor Department said on Wednesday its producer price index fooilprice.comr
final demand edged up 0.1 percent last month” Story at…
CRUDE INVENTORIES (OilPrice.com)
“Amid rising oil prices following President Trump’s
withdrawal from the Iran nuclear deal, the Energy Information
Administration added to
the bullish sentiment by reporting a draw of 2.2 million barrels in U.S. crude
oil inventories.” Story at…
US CANCELS THE IRAN DEAL
I am not going to comment on whether the Iran “Deal” was
a good one or bad one. I don’t know. I
do know that the pullout is a direct result of Executive overreach by the Obama
administration and it follows past Presidential precedent – Presidents have
made “agreements” with foreign powers instead of making Treaties. In this case,
President Obama’s failure to present the Agreement/Treaty for ratification is
what doomed it. Had Obama followed the US Constitution and presented the Iran Treaty
to the Senate for approval, it would not have been possible for Trump to undue it. Without Senate approval, he never should have
made the “agreement”. It is hard to say what this means for the stock market –
there seemed to be little reaction to Trump’s announcement Tuesday.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 1% to 2698.
-VIX dropped about 9% to 13.42.
-The yield on the 10-year Treasury rose to 3.005%.
My daily sum of 17 Indicators improved from +3 to +6; the
10-day smoothed version improved from -33 to -21. The basket of Market Internals I track
remained Positive on the markets.
Not too many indicators are Bearish. Most are bullish or
neutral. The overbought-oversold ratio, sometimes called the advance-decline
ratio, was indicating “overbought” today. This indicator is usually early so I’ll
ignore it for now. Bollinger Bands are close to a warning “overbought” level,
but this indicator needs to work with RSI and RSI is not currently near overbought.
VIX continues falling and that’s a good sign.
The Index popped above the 50-day moving average (50-dMA)
and is sitting 0.8% above it. Let’s see if the Index can close above the 50-dMA
again. That should confirm a trend
change, but it didn’t work last time – the Index was above its 50-dMA on 17 and
18 April, but it subsequently turned down and retested the correction low on an intra-day basis.
The Index almost closed above the 100-dMA. The 100-day is
now 2706. That’s another hurdle that will entice more buyers if we can get
above it.
Wednesday was a statistically-significant up-day. That
just means that the price-volume move up exceeded statistical parameters that I
track. The stats show that about 60% of the time a statistically significant
move up will be followed by a down-day the next day. This time, let’s hope that
the signal for the statistically-significant day is due to more bullish fervor
and not a sign that the Index is topping out. I’ll take the bullish view – as I
have been writing, I think the correction has ended…we’ll see.
My plan ahead remains: If the S&P 500 drops to its
prior low of 2581 and there is an unsuccessful retest, I will probably cut
stock holdings again. If we see a successful test I’ll be adding to stocks.
Breadth is improving
MOMENTUM ANALYSIS IS STILL QUESTIONABLE. As one can see
below in both momentum charts, there are still a lot of issues in negative
territory, i.e., they have weak upward momentum. That’s just an indication that
the market is in correction mode and most stocks have been headed down.
Momentum has gotten worse in the last week or so. Today, conditions were more
positive. 100% of the ETFs were up – it has been a month since we saw all the
ETF’s up on a day.
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. (On 5 Apr 2018 I
corrected a coding/graphing error that has consistently shown Nike
incorrectly.)
*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).
18 Apr 2018 I
increased stock investments from 35% to 50% based on the Intermediate/Long-Term
Indicator that turned positive on the 17th. (It has since turned Neutral.) For
me, fully invested is a balanced 50% stock portfolio. 50% is my minimum unless
I am in full defense mode.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Wednesday, the Volume, VIX, Price and Sentiment indicators were
neutral. Overall this is a NEUTRAL indication.
