CONSUMER CONFIDENCE (Reuters)
“U.S. consumer confidence rose by more than expected to
the highest level since November as Americans felt the best about current
economic conditions in 18 years, highlighting the effects of a robust labor
market and rising wages. The Conference Board’s index climbed to 134.1 in May…”
Story at…
ECONOMY ON RECESSION WATCH – MORGAN STANLEY (CNBC)
“Recent data points suggest US earnings and economic risk
is greater than most investors may think,” wrote Michael Wilson, the
firm’s chief U.S. equity strategist.…Morgan Stanley economists have lowered
their second-quarter U.S. GDP forecast to 0.6% from 1.0%. That comes
after J.P. Morgan
last week cut its own second-quarter outlook to 1% from 2.25%...“The
adjusted yield curve inverted last November and has remained in negative
territory ever since, surpassing the minimum time required for a valid
meaningful economic slowdown signal,” Wilson wrote. “It also suggests the ‘shot
clock’ started 6 months ago, putting us ‘in the zone’ for a recession watch.”
Story at…
-Tuesday the S&P 500 fell about 0.8% to 2802.
-VIX fell about 10% to 17.5.
-The yield on the 10-year Treasury slipped to 2.265%.
The Fosback Hi-Lo Logic indicator continues headed in the
bear direction, because both 52-week highs and lows have been elevated recently.
This indicator was the only one that called the exact top of the 20% correction
that started in September of 2018. It is not calling a sell yet, but it is much
closer to a sell than a buy.
My daily sum of 20 Indicators improved from -4 to -1 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -45 to -37. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
The MACD S&P 500 price indicator continued sharply
down.
Breadth (% of stocks advancing over the last 10-days) improved
to 51% so the advance decline line is positive over the last 10-days. I am
suspicious that this indictor is only positive because the value 11-days ago
was really bad and that number was replaced today with a number that is just mostly
bad. A 10-day moving average drops day 11 and adds day 1 (today’s number) each
day. The moving average convergence-divergence analysis of breadth is bearish
so we have mixed signal on breadth.
Some of the New-high/new-low, shorter-term data turned up;
longer term it’s still down.
Today was the 7th distribution day in the last
six weeks – a negative sign (6 is considered a bear sign).
VIX is falling more steeply and gave a bearish signal
today. This is a bad sign because the Options Boys usually have their act
together and they are getting more bearish.
On the day, we saw late-day selling, but the Smart Money
indicator remains flat, a neutral sign.
My Money Trend indicator turned up and is now mildly
bullish.
Today was a statistically significant down-day. That just
means that the price-volume move exceeded my statistical parameters. Statistics
show that a statistically significant down-day is followed by an up-day about
60% of the time. Statistically-significant, down-days happen at bottoms, but
not all statistically-significant, down-days are bottoms.
We are seeing a few signs of a possible turn up in the
S&P 500; unfortunately, most indicators are still headed down and today didn’t
appear to be a bottom. Volume was higher as selling pressure increased. This suggests
more selling, but we don’t know how much more.
I still have a very low % invested in stocks and I’m looking
for a buying point.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: 0
Most Recent Day with a value other than Zero: +2 on 13
May (RSI & Bollinger Bands were bullish, but this signal has expired.)
(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)
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE on the market at the close, BUT I am suspicious as I noted when discussing
Breadth above.
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).
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 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
Tuesday, the VIX indicator was Bearish; Volume, PRICE and
SENTIMENT indicators were neutral. Overall this is a NEUTRAL indication.
Just a reminder: This indicator is my
primary long-term indicator and it gave SELL signals 13 thru 20 May.
