CPI (MarketWatch)
“Rising rents and the higher cost of gas in April spawned
a sizable increase in inflation for the second month in a row, but price
pressures more broadly appeared to pose little threat to the U.S. economy. The
consumer price index rose 0.3% in April, the
government said Friday.” Story at…
FED WARNS ON CORPORATE DEBT (Real Investment Advice)
“Never before in human history have we seen so much
debt. Government debt, corporate debt, shadow-banking debt, and consumer
debt are all at record levels. Not just in the U.S., but all over the world. If
you are thinking this is a “Goldilocks economy,” “there is no recession in
sight,” “Central Banks have this under control,” and that “I am just
being bearish,” you would be right.
But that is also what everyone thought in 2007.”
Commentary at…
INVESTMENT STRATEGY EXCERPT (Raymond James)
“Given the underlying strength of the U.S. economy,
positive future earnings growth, and our expectation that the U.S. and China
will ultimately come to a trade agreement, we continue to favor cyclicals over
defensive sectors and would use any further period of weakness as a buying
opportunity. Turning to earnings, with ~90% of companies having reported during
the 1Q19 earnings season, 74% of companies have beaten expectations (above the
previous 16-quarter average of 72%) and earnings growth has crept up to 0.9%
year-over-year (YoY) (well above the expected decline of 3% at the start of
earnings season).” – Larry Adam. Full commentary at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.4% to 2881.
-VIX fell about 16% to 16.04.
-The yield on the 10-year Treasury rose to 2.467%.
The story for the day was the big recovery. The S&P
500 bottomed around 11am (down over 1.5%) and rose for the rest of the day,
with a little dip near the close. Apparently, there was enough bullish news to
get the buyers to move in. I didn’t see
much to be optimistic about; it looked like more if the same. Today, Trump went
ahead with additional tariffs. I am all about buy-American these days, so bring
it on! We need a fair trade-deal before we can drop the Tariffs. With no deal,
tariffs remain and that’s not good for the economy since the cost of many goods
will go up. It isn’t a game of chicken though; Democrats support a tough stance
and even Chuck Schumer has publicly supported the President’s stance. (Incredible!)
As previously noted, since the trade deal is driving the
market action, the market may depend on the next Presidential tweet.
My daily sum of 20 Indicators improved from -9 to -6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -6 to -15. Most of
these indicators are short-term. This is a bearish indication.
The 5-10-20 Timer system gave a sell signal today This simply
means that the 5-dEMA and the 10-dEMA have dropped below the 20-dEMA. This is a
decent indicator all by itself.
There were no bottom indicators today. So far, it does
not appear that we have made a bottom.
The S&P 500 is only 2.2% below its all-time high. That’s
not much and some further declines would be expected after this huge run up
since last December.
I still have a very low % invested on stocks and I’m
looking for a buying point. I am going to wait for indicators to get bullish
before I move.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 30
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained NEGATIVE on the market at the close.
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 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
Friday, the Panic Indicator remains negative; VIX, PRICE,
VOLUME, and SENTIMENT indicators were neutral. Overall this is a NEUTRAL
indication although the indicator is close to issuing a sell signal. At noon
today, it was a Sell, but it improved later in the day.
