PERSONAL INCOME (Peoples Pundit)
“The Bureau of Economic Analysis (BEA) said personal
income gains beat the consensus forecast in April, rising $92.8 billion (0.5%).
The reflected increases were fueled by personal interest income, wages and
salaries, and government social benefits to persons.” Story at…
PCE PRICE INDEX (Reuters)
“U.S. consumer prices increased by the most in 15 months
in April, which could support the Federal Reserve’s contention that recent low
inflation readings were transitory and allow the central bank to keep interest
rates unchanged for a while…The personal consumption expenditures (PCE) price
index increased 0.3% last month, the biggest gain since January 2018…” Story
at…
My cmt: PCE Price Index is the FED’s favorite inflation
indicator.
MICHIGAN SENTIMENT (Bloomberg)
“U.S. consumer sentiment increased by less than initially
reported in May as an escalation of the trade war with China weighed on the
outlook for the overall economy, paring gains that previously showed a 15-year
high. The University of Michigan’s sentiment index rose to 100…” Story at…
CHICAGO PMI (Advisor Perspectives)
“The latest Chicago Purchasing Manager's Index, or the
Chicago Business Barometer, rose to 54.2 in May from 52.6 in April…”
Charts and commentary at…
MEXICAN TARIFFS (CNBC)
“The U.S. is set to impose a 5% tariff on all Mexican
imports from June 10, which came as a shock as the White House just took a
formal step to kickstart approval of the United States Mexico Canada Agreement.
Trump’s 180-degree turn on one of U.S.′ largest trading partners is sending a
ominous message to the international community that he can’t be trusted, Wall
Street analysts said.” Story at…
My cmt: Trump said that he would be unpredictable as
President and he has proven true to his word.
One can argue whether this is good foreign policy, but it clearly isn’t
good for the stock market since markets hate uncertainty.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 1.4% to 2751.
-VIX rose about 8% to 18.71.
-The yield on the 10-year Treasury slipped to 2.130%.
There are different definitions of the Hindenburg Omen. That
indicator is supposed to foretell of a coming crash, like The Hindenburg. For
my purposes, a Hindenburg Omen includes 3 requirements: New-lows twice
new-highs; 10-dEMA of the Fosback H/Lo Logic Index >30; McClelland
Oscillator less than zero. My version of the HO is a rare signal. The last one was in Jan 2015 and it preceded
a 14% correction top by about 4-months.
One different definition of the signal says there have
been 2 Omens recently, on 20 and 24 May. For more info see…
While I don’t have a Hindenburg Omen yet, we do see
New-lows twice New-Highs with the McClelland Oscillator in negative territory.
We also note that the Fosback Hi/Lo Logic Index is in the upper 80% of its
range and is therefore, leaning bearish.
Those indicators alone are enough to cause concern since the likely
outcome suggests further downside, though perhaps not in a straight line.
My daily sum of 20 Indicators dropped from -10 to -13 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations declined from -45 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. There were a lot of bearish
indicators today.
Some Bearish Signs:
-S&P 500 was 0.8% below its 200-dMA at today’s close.
-There have been 8 Distribution days in the last 6-weeks,
a clear bearish sign.
-Breadth, the 10-dMA of stocks advancing on the NYSE,
dropped again to a bearish 41%.
-The S&P 500 is underperforming the cyclical industrial
stocks (XLI-ETF) by quite a lot and XLU-ETF (utilities) is outperforming the Index; these internals are giving a clear sell signal.
-VIX is climbing rapidly and is bearish.
-The size of down-moves has been bigger than the up-moves.
-Smart Money (measured by late-day action) has been
falling over the last 10-days.
-Up-volume is falling.
-New-highs are crashing while new-lows are jumping.
-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.
Not many Bull Signs…
-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. Today didn’t
look like a bottom, so this is a one-day, Bull Sign.
-The overbought/oversold index is oversold. This
indicator is usually early so this may not be all that bullish
-Bollinger Bands are oversold. They can remain oversold
for a long time. RSI did not confirm
this indicator. (I use them together.)
So far, the S&P 500 is 6.6% below its all-time top. I think the S&P 500 is going lower, but I won't guess at how much lower.
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: +1
Most Recent Day with a value other than Zero: +1 on 31
May (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…
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).
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. (Bad call,
but it may yet work out.)
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the VIX and VOLUME indicators were Bearish; PRICE
and SENTIMENT indicators were neutral. Overall this is a BEARISH SELL indication. This indicator is my primary long-term
indicator and it gave SELL signals 13 thru 20 May and now again on 31 May.
