CPI (CNBC)
“U.S. consumer prices rose in July and the underlying
trend continued to strengthen, pointing to a steady increase in inflation
pressures that keeps the Federal Reserve on track to gradually raise interest
rates. The Labor Department said on Friday its Consumer Price Index
advanced 0.2 percent, the bulk of which was due to a rise in the cost of
shelter.”
8 MEASURES SAY A CRASH IS COMING (Real Investment Advice)
“In a recent post, It’s Not Too
Early To Be Late, Michael Lebowitz showed the
historical pain investors suffered by exiting a raging bull market too early.
However, he also showed that those who exited markets three years prior to
peaks, when valuations were similar to today’s, profited in the
long-run…Currently, with the Equity Q-ratio pushing the 3rd highest level in
history, investors should be very concerned about forward returns. However,
with the technical trends currently “bullish,” equity exposure should remain
near target levels for now.” Story at…
My cmt: A crash is always coming – it’s the timing that
is the uncertain.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.7% to 2833.
-VIX was up about 16% to 13.12.
-The yield on the 10-year Treasury dropped to 2.871% as
of this post.
Currently, my daily sum of 17 Indicators dropped from -5
to -7 while the 10-day smoothed version that negates the daily fluctuations
fell from -8 to -14.
There are more negative signs today:
-10-day advancing volume dipped slightly below 50% showing
that over the most recent 10-days less than half of the volume on the NYSE has
been advancing.
-Money Trend is falling, a bearish sign.
-Late day action (the realm of the Pro traders) bounced
up on a 20-day basis, but remains falling on it’s smoothed indicator.
-Only 50.9% of stocks have advanced over the last 150-days.
That’s not particularly bearish yet, but if it drops below 50% I’ll get
concerned. The last time we saw a number below 50% on the 150-dMA was for an
extended period from August 2015 thru Feb 2016. During that period the markets
were in mild turmoil and there was a 13% correction from the high in November 2015
thru February 2016.
-New-high/New-low data is bearish.
-There was
another odd statistic today that I failed to mention in my initial post. Unchanged
volume was extremely high today (Friday). I had
to go all the way back to 12 Jan 2016 to find a day with unchanged volume as
high as Friday. Interestingly, that too
was during the correction I mentioned in the above paragraph. That doesn’t mean
we are going to have a correction; but the usual interpretation of high unchanged
volume is that investors are confused. As a result, high unchanged volume can
indicate a change in market direction.
-On a shorter term, only 47.6% of stocks have advanced
over the last 10-days. Any number below 50% is bearish here too. -New-high/New-low data is bearish.
-Statistical analysis of daily market moves shows the
market is too calm – that’s the calm before the storm. This indicator has not
been reliable recently so we can’t get worked up over this one.
Bull Signs:
-The 10-dMA of Tick (sum of closing trades each day) was -194.
A number below zero is where bottoms are made according to Tom McLellan. That
may be, but we don’t have any other oversold indications so it’s hard to put
too much faith in this number.
-Tuesday was a statistically-significant down-day. That
just means that the price-volume move down exceeded statistical parameters that
I track. The stats show that about 60% of the time a statistically significant
move down will be followed by an up-day the next day.
While indicators are falling, we still haven’t seen the
topping indicators signal a top. That
can make it hard to make a sell decision since we didn’t see strong sell signals.
Instead we could be faced with a slowly deteriorating market and it becomes a
matter of judgement and trend-following indicators to make the sell decision.
The most likely scenario remains a decline in the 3-5%
range. It could of course get much bigger, it’s hard to say…we will have to
wait and see.
I remain fully invested.
MOMENTUM ANALYSIS:
Note: Momentum analysis is not very effective in a falling market. We're not there yet; it's just a concern.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*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 remained
NEGATIVE 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: Friday, the Price indicator was positive; Volume, VIX &
Sentiment indicators were neutral. Overall this is a NEUTRAL indication.
