“In the modern world the stupid are cocksure while the
intelligent are full of doubt.” - Bertrand Russell, from his essay ‘The Triumph
of Stupidity’, published in 1933.
SMALL BUSINESS OPTIMISM (PeoplesPunditDaily)
“The National Federation of Independent Business (NFIB)
Small Business Optimism Index gained a solid 1.7 points in April to 103.5, an
elevated reading that beat the high end of the forecast range…The survey
results for April are strong across the board.” Story at…
JP MORGAN SOUNDS ALARM (Bloomberg)
“-Investor positioning is now a ‘headwind’ as sell-off
continues
-Bank strikes a
bearish note on retail, hedge-fund exposures
As trade tremors reverberate, a bullish stock mantra just
got trashed by JPMorgan Chase & Co.” Story at…
TARIFF TANTURM CONTINUES (Heritage Capital)
“…as I wrote about before, the markets were setting up to
pause, digest or even pullback modestly after the Fed meeting on May 1. They
were just looking for that excuse which came in a big way over the past week or
so…we have to be on the lookout for a turnaround on Tuesday. What we don’t want
is a large gap higher on Tuesday that runs straight up into the close. That
would cause me to look for another decline. Rather, the best thing for the
bulls would be a moderate down open that reverses during the morning and traps
the bears.” - PAUL SCHATZ,
PRESIDENT, HERITAGE CAPITAL
TRADE WAR (Real Investment Advice)
“With
the market weakness yesterday, we are holding off adding to our equity “long positions” until we see where the market finds
support. We have also cut our holdings in basic materials and
emerging markets as tariffs will have the greatest impact on those areas. Currently,
there is a cluster of support coalescing at the 200-dma, but a failure at the
level could see selling intensify as we head into summer.” Commentary at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.8% to 2834.
-VIX dropped about 12% to 18.06.
-The yield on the 10-year Treasury rose to 2.416%.
We didn’t get the price action that Mr. Schatz had hoped
for (see above TARIFF TANTURM CONTINUES) when he wrote the above comment
Monday. Instead, the markets gapped higher Tuesday; improved all day; and then
faded into the close. We didn’t see the turnaround – instead we saw a bullish
reaction-bounce to yesterday’s selloff followed by weakness. This didn’t look
like Turn-Around Tuesday to me.
My daily sum of 20 Indicators improved a bit from -9 to -8
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -22 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. This remains a bearish
indication.
The 5-10-20 Timer system remains 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, but it is somewhat prone to whipsaw
action.
Both RSI and Bollinger Bands signaled oversold yesterday,
but are both now neutral.
There was a decent reversal in up-volume today. Up-volume
was 9% yesterday and 79% today. These numbers don't meet the test for Lowry Research’s high-volume, turn-around days
so as it stands, they are not all that bullish and no buy-signal has been indicated.
So far, it does not appear that we have made a bottom. As
of Tuesday’s close, the Index is 2.1% above its 200-dMA (2776). As always, that
will be a significant area of support.
I still have a very low % invested in 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: +2 on 13
May (RSI & Bollinger Bands were positive.)
(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…
TUESDAY 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 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, VIX and VOLUME indicators
were negative. PRICE and SENTIMENT indicators were neutral. (Sentiment was very
nearly a sell as of Friday.) Overall this is a BEARISH indication that is
now issuing a SELL signal.
