INVESTMENT STRATEGY (Raymond James)
“As the S&P 500 rose above our year-end target of
2946 six months ahead of schedule, it has subsequently become expensive; the
current 18.2x LTM (last twelve months) P/E is above our fair value 17.75x P/E
multiple…
…Focus of the Week: We would like to see breadth
improve if the advance continues. For example, the S&P 500 Equal
Weight Index, as well as the small caps, have not been able to gain relative
strength in the recovery. Relative improvements from those indices would
reflect broadening participation and be more supportive of the market
technically.” – Larry Adams, Chief Investment Officer, Private Client Group.
Commentary at…
ANOTHER RATE CUT -
SERIOUSLY? (Heritage Capital)
“Jay Powell & Company gave the markets exactly what
they wanted on Wednesday. They threaded the needle which is no easy feat. As
someone who has been very critical of the Fed, I have to give them props for
not upsetting the apple cart. The problem now is that markets are pricing in a
100% chance of a interest rate cut in July which doesn’t sit well with me. If
stocks continue rallying, how can the Fed really give it more juice?” - Paul Schatz
President and Chief Investment Officer Commentary at…
In other words; Is the market setting up for a big July
disappointment?
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.2% to 2945.
-VIX slipped about 1% to 15.26.
-The yield on the 10-year Treasury unchanged at 2.021%.
I am seeing comments about a triple-top on discussion
boards. A triple top is a bearish revisiting of all-time highs that has already
failed twice and is about to fail again (so they say). If we have a true triple-top,
then the data should show it. We would
expect the tops to occur on falling volume and decreasing breadth. Let’s see:
We’ve had 3 tops as follows:
(1) 2931, 20 Sep 2018; Vol 3400m; 10dMA Breadth 51.5%
(2) 2946, 30 Apr 2019; Vol 3934m; 10dMA Breadth 52.3%
(3) 2954, 20 Jun 2019; Vol 4122m; 10dMA Breadth 60.6%
*Breadth = % of stocks advancing on the NYSE.
We see higher volume and a strengthening market on each
successive top. So far, it does not look
like we need to worry about a triple top.
Sentiment continuing to fall. This suggests the markets
can go higher.
Still, it looks like we may see a retreat back to the
50-dMA at about 2880. Unless something changes, a slip back to the 50-dMA would
be a buy-the-dip opportunity.
RSI remained bearish today (3rd day in a row),
but Bollinger Bands are still in neutral territory. Bollinger Bands are close
to overbought, but not there yet. I use
these indicators together so I am cautious, but still bullish. These signals could
be bearish for some time. It would take
more than RSI and Bollinger Bands to call a sell.
Cyclical stocks are still under-performing the S&P
500 while Utilities are out- performing relative to the S&P 500. Both are
bearish indications, but we have only seen a few other indicators joining the
bear party.
The Smart Money (late day action) dropped today and has
been down over a longer term.
My daily sum of 20 Indicators dropped from -2 to -4 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +45 to +33. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
Still, I’m remain bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: -1
Most Recent Day with a value other than Zero: -1 on 24
June (RSI was bearish.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*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…
MONDAY 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 55% 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.
As a retiree, I am conservatively positioned with a balanced portfolio. You may be comfortable with a higher % invested
in stocks – that’s OK.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE indicator was positive; VOLUME, VIX and
SENTIMENT indicators were neutral. Overall the Long-Term Indicator dropped
to a NEUTRAL indication.
