“But let me offer you my definition of social
justice: I keep what I earn and you keep what you earn. Do you
disagree? Well then tell me how much of what I earn belongs to you - and
why?” - Walter Edward Williams, the John M. Olin
Distinguished Professor of Economics at George Mason University,
AUTO SALES (CNBC)
“Major automakers on Tuesday posted mixed U.S. sales
results for June and the second quarter, with demand still fairly strong for
SUVs and pickup trucks while passenger car sales continued a long-running
decline.” Story at…
OLD AGE DOESN’T KILL ECONOMIC EXPANSIONS (Marketplace)
“In the postwar period, recessions have generally
resulted from three causes: substantial monetary or fiscal tightening in
response to inflationary pressures; some kind of financial crisis, such as the
subprime mortgage collapse of 2008 and the technology bust of 2000; or a
massive external shock that vastly increased energy prices. Until one of these
events occurs, we can be fairly confident that the U.S. expansion will not just
“die of old age.” - Anatole Kaletsky, Chief Economist of Gavekal Dragonomics. Commentary
at…
My cmt: Just last week I posted a piece that flatly
stated that a recession was already underway. See “Slowdown Has already
Started” at…
Now we have the above piece; what’s a guy to think? This
is why I try to resist economic predictions and analysis. Investors vote every
day on whether we are in a recession, or if one is imminent, and that vote
appears daily in the price of the S&P 500. I don’t think listening to
economist opinions helps to make investment decisions.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.3% to 2973.
-VIX dropped about 8% to 12.93.
-The yield on the 10-year Treasury slipped to 1.956%.
At yesterday’s new all-time high for the &P 500, 7.4%
of stocks on the S&P 500 made new 52-week highs. Today it slipped to 5.2%. These are
reasonably broad numbers, about average for tops (the 5-yr avg = 6.7%) and that
suggests decent participation in the advance.
Back in September of last year when the S&P 500 made a new all-time
high, only 2.9% of stocks were making 52-week new highs and that was the start
of a 20% correction.
Those familiar with Lowry Research numbers for tops will
recognize that my numbers are different than theirs. Their analysis of the market only considers
operating companies. In theory, using
only operating companies should be better since it eliminates the noise of
other issues traded on the NYSE (ETFs, bonds, etc.). Mine is based on all
issues traded on the NYSE so it does include some of that noise; however, my
numbers still seem to give good signals, albeit at different thresholds.
We saw the decliners outpace advancers today so I suspect
the S&P 500 will follow the majority and give us a down day tomorrow. Some of
the indicators slipped today on those weakening internals.
My daily sum of 20 Indicators slipped from +5 to +2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +1 to -1. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I remain bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 1
July (Late-Day action, top-indicator 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)
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals slipped
to 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
Tuesday, the PRICE indicator was positive; VIX, VOLUME
and SENTIMENT indicators were neutral. Overall the Long-Term Indicator switched to HOLD.
