“The future is inherently unknowable. We can never say
with certainty what will happen in the months ahead. But the odds suggest an
imminent recession in the US is unlikely at present and, barring a rogue event
like 1987, a bear market is not currently underway. That means equities are
most likely on their way to new highs in the coming months.” – Urban Carmel.
Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 0.5% to 2747.
-VIX dropped about 5% to 12.74.
-The yield on the 10-year Treasury rose to 2.944%
Bollinger Bands indicate a squeeze today. That happens when
the upper and lower bands get too close together based on some math rules. It’s
been a year since we saw the last Bollinger Band Squeeze. Here’s what Stockcharts
had to say:
“The Bollinger Band Squeeze occurs when volatility falls
to low levels and the Bollinger Bands narrow. According to John Bollinger,
periods of low volatility are often followed by periods of high volatility.
Therefore, a volatility contraction or narrowing of the bands can foreshadow a
significant advance or decline. Once the squeeze play is on, a subsequent band
break signals the start of a new move. A new advance starts with a squeeze and
subsequent break above the upper band. A new decline starts with a squeeze and
subsequent break below the lower band.”
Ok, so the bottom line is a bigger move is coming, but
the Bollinger Band squeeze won’t tell us which way it will be. If memory serves,
John Bollinger said to look at the RSI to determine direction. Currently RSI
(14-day, SMA) is 54. The neutral point for RSI is 55 so my suspicion is that
the Squeeze play could last a while. We do note that the S&P 500 is nearing
its upper band and that would usually indicate a drop is coming. I won’t be convinced until we see RSI and a
few other indicators confirm it.
Currently, other indicators are not confirming the signal.
My statistical analysis of daily moves is not low enough to send a negative
signal. VIX is low, but perhaps not low enough.
I’d be looking for a big move if VIX falls below 10 again. While I’ve
written “big-move” a couple times, it isn’t necessarily all that big. The last
squeeze presaged a 1% drop. No big deal unless other indicators line up and
agree.
My daily sum of 17 Indicators improved from +4 to +6,
while the 10-day smoothed version improved from +11 to +15.
My longer-term indicator system remains bullish and I
am too.
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. (On 5 Apr 2018 I
corrected a coding/graphing error that had consistently shown Nike
incorrectly.)
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to 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.
On 10 May 2018 I
added stock positions to increase Stock investments to 58% based on more
evidence that the correction is over. This is high for me given that we are
late in this cycle (and as a retiree), but it indicates my bullishness after
the correction. I’ll sell these new positions quickly if the market turns down.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Monday, the Price and VIX Indicators remained positive; Volume
and Sentiment indicators were neutral. Overall this is a BULLISH indication.
