“Job growth in the private sector slowed dramatically in
May, adding to concerns of a deceleration in U.S. economic expansion. New
private sector payrolls rose by just 27,000 in May, ADP Research Institute and Moody’s reported Wednesday…” Story at…
ISM SERVICES (Reuters)
“U.S. services sector activity expanded at a brisk pace
in May and industries hired more workers, offering some respite for an economy
that is slowing following a temporary boost from exports and an accumulation of
inventories in the first quarter.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“Crude oil price trended lower after the Energy
Information Administration reported a
weekly build in crude oil inventories, at a sizeable 6.8 million barrels.”
Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 jumped about 0.8% to 2826.
-VIX dropped about 5% to 16.09.
-The yield on the 10-year Treasury was unchanged at 2.134%.
90% up volume days are an extreme bullish indicator and often
occur at the end of corrections or pullbacks when buyers come back in the
market. This forces short-sellers to
cover and up-volume jumps even higher. This indicator was identified by Lowry
Research and they’ve published several papers on the subject.
Tuesday, we saw that 89% of the total volume was up-volume.
Another important part of the indicator is that the close should be at the
upper end of the daily range and we saw that too. I figured the 89% was close
enough, given that I had identified a number of bullish indicators Monday.
Tuesday’s bullish action verified Monday’s bullish call,
so I made stock purchases Tuesday to bring my % invested in stocks up to a conservative
50% value. Today, the market action remained bullish with good follow-thru.
One of my favorite indicators is one that is fairly new
for me. I do a Moving Average Convergence Divergence (MACD) analysis of Breadth
which is a measure of advancers and decliners. This is such a weird way of
looking at the world I am sure no one else is doing exactly the same thing. The
good news is that today we had a bullish crossover of Breadth based on MACD.
The FOSBACK Logic Index is still leaning bearish, but the
numbers are improving. They never did
issue a sell signal. Late-day action
(the Smart Money) is bullish. VIX is now in neutral territory as the Options Boys
are no longer bearish.
My daily sum of 20 Indicators remained +2 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations improved from -41 to -40. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
I’m bullish now, given indicators that are bullish and
the 90% up-volume day Tuesday confirmed and punctuated the buy call. Does it
seem crazy to buy now with so much bad news out there? This is just another
reminder; “Trade what you see, not what you think.” All we can do is go with
the odds.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: 0
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.
MOMENTUM ANALYSIS:
I believe the correction/pullback has ended so momentum
analysis should get more valuable.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEUTRAL on the market.
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 50% invested in
stocks as of 4 June 2019. This is based on the improved indicators 3 June and
my recommendation to increase stock holdings if we saw strong buying on 4 June.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the VIX, VOLUME, PRICE and SENTIMENT
indicators were neutral. Overall the Long-Term Indicator remained NEUTRAL.
