PERSONAL SPENDING / PCE PRICE INDEX (Bloomberg)
“U.S. consumer spending rebounded in March while the
Federal Reserve’s preferred underlying inflation gauge [PCE Price Index] eased
to a one-year low, reinforcing the central bank’s patient stance on interest
rates even as the economy’s main engine holds up…Purchases, which make up more
than two-thirds of the economy, rose 0.9 percent in March from the prior month,
topping estimates with the best gain in almost a decade…” Story at…
S&P 500 REPORTING YEAR-OVER-YEAR DECLINE IN PROFIT
MARGIN (FactSet)
“The blended net profit margin for the S&P 500 for Q1
2019 is 10.9%. If 10.9% is the actual net profit margin for the quarter, it
will mark the first year-over-year decline in the net profit margin for the
index since Q4 2016. It will also mark the lowest net profit margin reported by
the index since Q4 2017…It is interesting to note that analysts expect the
index to report higher net profit margins over the next few quarters. Based on
current earnings and revenues estimates, the estimated net profit margins for
the next three quarters (Q2 2019 through Q4 2019) are 11.4%, 11.8%, and 11.6%,
respectively.” See FactSet Earnings Insight excerpt at…
JEFFREY SAUT HAS RETIRED
I always enjoyed Jeffrey Saut’s Monday morning market
commentary from Raymond James’, Chief Investment Advisor. We could always count on his insight, folksy
manner, and sage advice. I met him while visiting St Petersburg last year and
he was gracious with his time for this market junkie. Enjoy your retirement
Jeff!
IMPEACH TRUMP?
“A majority of Americans say they don’t support
impeaching President
Trump in light of
special counsel Robert
Mueller’s probe into possible Russian collusion and whether the
White House obstructed subsequent investigations, according to a new Washington
Post/ABC News poll. About 37 percent of Americans polled favored
starting impeachment proceedings in Congress…” Story at…
My cmt: I don’t like Trump; I voted for the Libertarian,
Governor Gary Johnson, because I hoped the Libertarians could get at least 5%
of the vote which would qualify them to receive Federal campaign funds. It is clear to me that neither the
Republicans nor the Democrats have the best interests of the nation in mind. But
on the subject of Impeachment, it seems to me that there must be clear evidence
of a Russian-Trump conspiracy. Absent that, I don’t see how you can convict the
President of obstruction of an investigation for a crime he didn’t commit.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.1% to 2943, a new
all-time high.
-VIX rose about 3% to 13.11. (Today, the Options Boys did
not confirm the rally.)
-The yield on the 10-year Treasury rose to 2.529%.
My daily sum of 20 Indicators declined from +3 to zero (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -6 to -4. Most of
these indicators are short-term.
The Index made a new all-time high and has remained there
so that’s a positive. A few other bullish signs: the sum of indicators has turned
up in the short-term; same for Money Trend; new-high/new-low data reversed
upward, but just barely. Nothing looks really all that bullish.
On the bearish side, there still have been 15 up-days in
the last 20-days and that’s mildly bearish. The extreme bearish number was on
Tuesday of last week; and the 10-dMA of Breadth is still falling; Bollinger
Bands are within a few points of being oversold, but that’s been true off and
on since 17 January. The most bearish stat? Statistical analysis of moves in
price-volume on the NYSE show a market that is too calm. This had been a very
good indicator, but in recent years it has often been too early to be useful. It
is pointing to trouble ahead, though. It used to be, if this stat was negative,
one could reliably short or buy a long VIX-ETF. Given the length of this rally,
I am paying attention to it.
While considering re-entering the markets in a more meaningful
way, I decided to check the performance of my short-term indicator. In 2018, the
analysis showed that it outperformed a S&P 500 buy-and-hold strategy by 11%
(+5% vs -6%). So, what has the indicator shown recently? The Short-Term
indicator was BUY 4 trading-session ago and SELL 6 trading-sessions ago and
mixed over the last 3 sessions. That’s not a strong signal ether way.
Jeepers! Maybe I already am a perma-bear. That bothers
me, because I am not outright bearish now; it just seems there’s enough
weakness in the underlying market internals to create a better buying
opportunity. We’ll see. If markets
improve a bit, I may finally buy.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 17
April (RSI was negative.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
NOTE: Topping
indicators are good at identifying a blow-off top with buyers in a frenzy. These indicators are not so good at
identifying a slow, rollover-top that can happen when buyers simply go on strike.
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)
*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
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).
I ran the numbers for 2018. Using the Short-term
indicator 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 took 13-buys and
13-sells, or a trade every 2-weeks on average.
My current stock allocation is about 30% invested in
stocks as of 9 January 2019. I sold the rally about half way up expecting a
retest of the lows Dec 2018.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, PRICE was positive; the VIX, VOLUME, and
SENTIMENT indicators were neutral. Overall this is a NEUTRAL indication.
