EXISTING HOME SALES (Reuters)
“U.S. home sales fell for a second straight month in
April, weighed down by a chronic shortage of more affordable houses, the latest
sign the economy was slowing after a temporary boost from exports and an
inventory overhang in the first quarter.” Story at…
CFNAI (MarketWatch)
“Factories proved to be a significant drag on April
economic activity, a setback reflected in the sharp pullback for the Chicago
Federal Reserve’s monthly index tracking the national economy. The Chicago
Fed’s index registered at a negative 0.45 in April, down from a positive 0.05
in March and a negative 0.31 in February.” Story at…
CORRECTION OVER (CNBC)
“It would appear that the majority of hedge funds do not
expect another sharp rise in volatility, and that they have concluded that the
correction has run its course,” Nomura strategist Masanari Takada wrote.” Story
at…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“Given that our earnings estimates ($166 in 2019
earnings) and economic forecasts (very low probability of recession) remain
unaltered as of now by this trade friction, we remain confident in our year-end
target of 2946. As a result, at levels near 2950, the risk/reward is less
attractive. However, at 2800 (5% upside) and 2700 (~10% upside) or below, the
S&P 500 is more attractively valued and presents better buying
opportunities.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.9% to 2864.
-VIX dropped about 8% to 14.95.
-The yield on the 10-year Treasury was essentially unchanged
a 2.427%.
There are a lot of unusual indicators; one is the “Distribution
Day.” It is one that is not built into my indicator count, but I track it
mostly because it pops out of the data that I collect for other purposes. Here’s
the definition:
“A distribution day is defined as the loss of more than
0.2% by a major index — the Nasdaq, the NYSE composite or the S&P 500 — as
volume ticks higher than the prior session's total. Tracking the accumulated
damage is crucial to gauging a market's health.” – Investors.com at…
https://www.investors.com/how-to-invest/investors-corner/tracking-distribution-days-a-crucial-habit/
This indicator suggests institutions are selling. Track
this indicator total over a 25-day period and if it reaches 6, it suggests a
correction coming (so they say). Well, we are here. Monday, we had the 6th
Distribution day in the last 25 trading-sessions. I don’t know; I see a fair
number of false correction-calls in the past.
We also saw another correction signal last week; there
were 5 statistically significant days in a 3-week period at the low (13 May).
Neither of these signals are in my indicator total – they are not all that
strong as indicators go. Further, we saw a lot of indicator improvement today
that will counter these 2 negatives if they can continue.
My daily sum of 20 Indicators improved from -12 to +1 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -72 to -62. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term. This is a big bullish swing on
the day and the 10-day number has turned up. We had a big bearish swing last
Friday, so we’ve seen some big back and forth movement recently.
Price has done the same thing as noted by the high number
of statistically significant days noted above. This sort of investor confusion is generally bearsih.
Lets’ do a run-down of some key mostly short-term indicators;
overall, we were close to neutral today:
BEAR SIGNS
-The Index is slightly below the 50-dMA and that
represents some overhead resistance. If we can break above it will be bullish.
-Panic Indicators expire tomorrow so this will be neutral
tomorrow. The panic indicator is triggered by high std-deviation moves after an
overly calm period. Corrections often follow.
-The 5-10-20 Timer system remains a sell signal. 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, but it is somewhat prone to whipsaw
action.
NEUTRAL
-Breadth vs the S&P 500 index indicates that the
Index is neutral when compared to most stocks on the NYSE.
-RSI is neutral.
-Bollinger Bands are neutral.
-Sentiment is elevated, but not currently a sell.
-MACD for S&P Price is neutral.
-Down-moves have been bigger than up-moves over the last
month, but not enough to give a negative signal.
-VIX is falling, but not fast enough to be bullish.
-The short-term Fosback High-Low Logic Index is neutral
today.
-The Smart Money via late day action (a variant of the Hayes
Indicator) showed some positive buying-action late today, but longer-term, the
indicator is flat. This has improved from the down trend we have been watching.
Closing tick (sum of final trades of the day) was negative today.
-Cyclical Industrials are underperforming the S&P
500. This shows investors are worried. Utilities are underperforming and that
counters the cyclical negative sign.
BULL SIGNS
-New-high/new-low data just switched upward, but it has
been flipping back and forth recently.
-Money Trend has turned and it is headed up.
-10-day Breadth (%-stocks advancing on the NYSE) is above
50%, i.e., the Advance/decline line is positive, over the last 2-weeks. The
MACD analysis of Breadth is also positive.
I still have a very low % invested in stocks and I’m
looking for a buying point. The long-term indicator switched to neutral; the
short-term internals switched to positive. If we see more improvement it will
be time to buy.
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.)
(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 switched
to POSITIVE 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).
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 Panic Indicator was negative; Volume, VIX,
PRICE and SENTIMENT indicators were neutral. Overall this is a NEUTRAL indication.
