“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
FOMC RATE DECISION (CNBC)
“The policymaking Federal Open Market Committee drops the
target range for its overnight lending rate to 2% to 2.25%, or 25 basis points
from the previous level.
The Fed cites “implications of global developments for
the economic outlook as well as muted inflation pressures” in its first rate
cut since December 2008.” Story at…
My cmts: Markets didn’t like the news as the stock market
dropped around 2pm and fell sharply around 2:30, presumably during the FED news
conference. It is a bit surprising since a 025% cut was widely expected. This
is probably algorithm trading and may not mean much.
CHICAGO PMI (MarketWatch)
“A measure of business conditions in the Chicago region
dropped further into contraction territory in July. The Chicago PMI business
barometer decreased to 44.4 in July from 49.7 in June…” Story at…
My cmt: Any number below 50 indicates contraction so this
is not good news. The markets fell after 10am (when the news came out), but it
is never a sure thing that the drop was due to the PMI number.
CRUDE OIL INVENTORIES (OilPrice.com)
“A day after yet another bullish oil inventory estimate
from the American Petroleum Institute, the Energy Information Administration
reported another solid decline in inventories, which added fuel to the price
rally.” Story at…
My cmt: One would think that rising oil prices would be
bad for the economy and bad for stocks.
It is generally bad for the economy, but there are so many oil
services stocks that it is often good for the stock market indices.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dipped about 1.1% to 2980.
-VIX rose about 16% to 16.12.
-The yield on the 10-year Treasury slipped to 2.011%.
Here’s another chart with the same point as yesterday.
Can the S&P 500 break convincingly above its trend line defined by the
highs going back to 2018? The odd thing is, I see so many charts that depend on
the scale chosen for the x and y axes. Yesterday’s chart showed the S&P 500
above the trend. This one shows it on
the trend even though the writer uses 3000 as the make or break level. We’ve
had 6 closes in a row above 3000 so one would think the S&P 500 has claimed
the higher ground and one rule confirms it. Another rule of thumb says we need
to break above a trend line by 3% to set a new trend. The 3% rule says we need to get above 3090.
Chart from…
Today’s results weren’t too encouraging; the Index failed
again to hold the 3000 level, even after a number of closes higher. Not a good
sign, but the news wasn't all bad.
Today, the drop in the S&P 500 cleared one of our
negative signs: The S&P 500 was too far ahead of its 200-day average
w/sentiment, but not now. This is a
top-indicator, but it may be too sensitive since the 200-dMA has been nearly
flat due to the prior correction. In addition, the Internals I track suprisingly turned positive.
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.
Overall, my daily sum of 20 Indicators slipped from zero
to -1 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from -4 to -3.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
Are we starting a correction without confirmed top
indicators? We don’t know; we’ll just
have to watch the market a bit more. Top indicators improved from -3 to -2.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2
Most Recent Day with a value other than Zero: -2 on 30
July (the S&P 500 is stretched relative to breadth; the Money Trend
Indicator is stretched relative to the S&P 500.)
(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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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
Wednesday, the PRICE indicator was positive; the
SENTIMENT, VIX and VOLUME indicators were neutral. Overall, the Long-Term
Indicator is HOLD.
