JOBLESS CLAIMS (Reuters)
“The number of Americans filing applications for
unemployment benefits increased moderately last week, suggesting the labor
market remains on solid footing even as the economy is slowing. Initial claims
for state unemployment benefits rose 3,000 to a seasonally adjusted 215,000 for
the week ended May 25…” Story at…
GDP (Bloomberg)
“U.S. economic growth last quarter was revised down by
less than expected amid stronger consumption and exports than initially
reported…Inflation-adjusted gross domestic product increased at a 3.1%
annualized rate in the January-March period…” Story at…
WHOLESALE / RETAIL INVENTORIES (MarketWatch)
“Pretty much every category of exports, and every
category of imports, fell in April. Exports fell 4.2% as imports dropped by 2.7%.
Automobile exports cratered 7.2%, while capital-goods exports fell by 6.5%.
Compared with a year ago, exports have dropped 3.6% as imports have fallen
0.9%.” Story at…
CHINA’S OMNINOUS TRADE MESSAGE (CNBC)
“The biggest newspaper in China explicitly warned the
U.S. on Wednesday that it would cut off rare earth minerals as a countermeasure
in the escalated trade battle, using an expression it only used twice in
history, both of which involved full-on wars.
"We advise the U.S. side not to underestimate the
Chinese side's ability to safeguard its development rights and interests. Don't
say we didn't warn you!" -The People’s Daily the official newspaper of the
Communist Party of China. Story at…
CORPORATE EARNINGS RECESSION AVOIDED (BusinessInsider)
“Now, with nearly all of S&P 500 companies' results
in the books this week, the numbers have come in slightly better than expected.
A bottom-line downturn appears likely to be narrowly avoided with a
first-quarter earnings gain of 1.5%, according to Bloomberg data.”
Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.2% to 2789.
-VIX dipped about 3% to 17.3.
-The yield on the 10-year Treasury slipped to 2.218%.
There were market pundits issuing “buy” guidance today
since the S&P 500 closed above its 200-day moving average yesterday. This
may be a bit early.
We note that the Russell 2000 is below its 200-dMA; as is
the DOW Industrial Average; the Nasdaq Composite closed on its 200-dMA
yesterday and bounced up today. If this pullback were solely about trade, then
the Russell should not be in as much distress. The small caps should be
insulated from earnings related to overseas customers. Perhaps small-cap
concerns reflect higher cost of goods? On the other hand, it could suggest
there may be more going on than meets the eye and caution is a good strategy
right now. One thing I have observed over the years: the Indices usually track
together, so if the majority is headed down, the S&P 500 is likely to
follow.
As I noted yesterday, it seems to me that Sentiment
should slip some before we can return to an upward trending S&P 500.
Further, we keep getting more bad news on the trade/tariff front as the above
piece on the Chinese rare earth metals threat. The U.S. imports 80% of its rare
earth from China. Tonight, Trump added tariffs on everything imported from
Mexico until they allow fewer immigrants to come to the US border. (Really?! Is
there no better way to solve this than to establish more tariffs?) As I write
tonight, Futures are down about 0.75% so the markets don’t like more tariffs.
My daily sum of 20 Indicators dropped from -11 to -10 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -40 to -45. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
Breadth, the 10-dMA of stocks advancing on the NYSE,
dropped again to a bearish 45%.
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…
THURSDAY 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).
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
Thursday, 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.
