ISM MANUFACTURING (Bloomberg)
“A measure of U.S. manufacturing activity unexpectedly
fell in May to the lowest level since October 2016…he Institute for Supply
Management’s purchasing managers index declined to 52.1 from 52.8…” Story at…
CONSTRUCTION SPENDING (HousingWire)
“The U.S. Census Bureau announced
that construction spending during April 2019 was estimated at a seasonally
adjusted annual rate of $1.3 trillion. Although April’s rate is
nearly the same as March's, the organization indicated April’s spending is
1.2% below the April 2018 estimate of $1,314.7 billion.” Story at…
AUTO SALES (CNBC)
“Major automakers on Monday posted higher U.S. new
vehicle sales for May, the first increase for 2019 as a strong economy and
upbeat consumer sentiment fueled demand.” Story at…
THE DIE IS CAST (Evil Speculator)
“Wednesday’s breach below ES 2800 was the inflection
point that effectively put us on the path toward 2700 and potentially lower.
Quite frankly no big surprise there as the price action over the past few weeks
was not indicative of a medium term trend reversal. The direction as of now
remains down and unless you are positioned short there are few reasons for
optimism.” Commentary at…
SELLOFF OVERDONE…BUT, MORE TO COME (Real Investment Advice)
“…Importantly, last week’s sell off did trigger an
important “sell signal” suggesting prices head lower over the few weeks.
In the very short-term the markets are oversold on many
different measures. This is an ideal setup for a reflexive rally back to overhead
resistance. [The 200-dMA is 2752 while the 50-dMA is 2870. Both represent
resistance.] Longer-term, the fundamental, economic, and technical backdrops
have collided which increase the odds of a more significant mean reverting
event…This week we are going to look at the recent
sell-off and the potential for a short-term “sellable” rally
to rebalance portfolio risks into.” – Lance Roberts. Commentary at…
https://realinvestmentadvice.com/selloff-overdone-looking-for-a-sellable-rally-05-31-19/
MARKET REPORT / ANALYSIS
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%.
-Monday the S&P 500 fell about 0.3% to 2744.
-VIX rose about 1% to 18.86.
-The yield on the 10-year Treasury rose to 2.1%.
Today was a busy day and I’m getting to the blog late. Here
we go…
Today looks like a correction end. We see improvement in a number of internals.
XLI (cyclicals) are recovering vs. S&P 500. The new-hi/new-low spread
improved by nearly 3 standard deviations. Breadth improved. The small caps
improved. The NYSE Composite was up
today – that’s just another sign of breadth improvement. We’ve seen a few
bottom indicators too. Bollinger bands and RSI did give buy signals earlier (not
on the same day) and they’ve remained very close to oversold “buys” for a few
days. Breadth vs. the S&P 500 was also nearly a buy. In a small correction,
signals aren’t strong. What we have is a
number of weak signals that suggest a bottom.
Since the signals aren’t all that robust, I’ll watch for
a strong move up Tuesday. That should confirm the buy signal. We also need to
recognize this may just be a bounce that will reverse down later.
On a general note…
My daily sum of 20 Indicators improved from -13 to -6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -62 to -57. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
So far, the S&P 500 is 6.8% below its all-time top
and the pullback has lasted 23 days.
I still have a very low 30% invested in stocks, but I think
we are at a buying point now. It may turn out to be a false signal, so I’ll
remain relatively conservatively invested by increasing to 50% invested in stocks. For me, this is fully invested, given the climate of the market.
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.
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:
In a correction (where we are now), momentum analysis is
not very useful. Of the ETFs, only the
XLU is likely to make money during the correction. Over the last 2-months, only
ITA (Aerospace and Defense) and XLU (utilities) are up and they are only up 1%.
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 improved
to NEUTRAL 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, but if we see strong buying Tuesday, I will be increasing my stocks holdings to 50%.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VIX and VOLUME indicators were Bearish; PRICE
and SENTIMENT indicators were neutral. Overall this remains a BEARISH indication; but
this indicator can give negative signs at a bottom since it is trend following
and the trend has been down. This
indicator is my primary long-term indicator and it gave SELL signals 13 thru 20
May and now again on 31 May and 3 June.
