“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
DEBT AND THE FAILURE OF MONETARY POLICY (Real Investment
Advice)
“This is one of the issues with MMT (Modern Monetary Theory) in
which it is assumed that “debts and deficits don’t matter” as long
as there is no inflation. However, the premise fails to hold up when one begins
to pay attention to the trends in debt and economic growth.
…a reversion to a structurally manageable level of debt
would involve a nearly $40 Trillion reduction of total credit market debt from
current levels. This is the “great reset” that is coming. The
economic drag from such a reduction in debt would be a devastating
process. In fact, the last time such a reversion occurred, the period was
known as the “Great Depression.”
My cmt: This was a long and interesting discussion of
debt and its effect on growth.
DOLLAR AND NONSENSE MARKET REVIEW (Real Investment
Advice)
“The global financial system has grown in complexity and
this complicates the Fed’s ability to control US dollar liquidity…
the presence of relatively high levels of debt, low rates
ultimately constrict economic activity… accelerating government debt is
like a noose on an economy. You might be able to create some space with low
rates that can provide some breathing room and some temporarily good news.
Longer term, however, natural forces will eventually cause the economy to
choke…the condition of a high level of government debt constrains the
effectiveness of monetary policy. Finally, all of this is happening in a
financial system that has greater systemic risk.” - David Robertson, CFA, CEO
of Areté Asset Management. Commentary at…
My cmt: This article was another long one, but it was an
interesting discussion of “liquidity”. What it is; why it’s important; and,
last, why the FED may not be able to control it in the future.
SAD BUT TRUE COMMENTARY (ZeroHedge)
Rep. Jim Jordan (R-OH) tore into Democrats during a
Thursday House Oversight Committee hearing, reminding
the selective-outrage brigade that "Not One Single So-Called
Cage Has Been Constructed By The Trump Administration... not
one."
"During the presidency of Barack Obama, we
didn't see outrage from the Democrats then. We didn't see prominent
Democrat members of Congress condemning the "concentration
camps" torture then. Again, President Trump has not built a
single "cage." The cages you see in the news and on Twitter
were constructed by President Obama's administration.” Story at…
Even the AP has confirmed this as true. Congress was slow
to appropriate the funds to fix the problem. They blamed Trump instead. The
House recently accepted the Senate version and the Congress funded about $4.5
billion to improve conditions in overcrowded migrant detention centers…after
several years of blaming Trump. Did I ever say that I hate all politicians?
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.3% to 2985.
-VIX dropped about 6% to 13.53.
-The yield on the 10-year Treasury slipped to 2.046%.
Late Day Action, the so-called Smart Money, continues to
be flat. On a percentage basis, the Smart Money has been less bullish than the
market for over a month.
The negative divergence between breadth and the S&P
500 continues and this indicator is not far from issuing a sell signal. This is
a decent top indicator.
My daily sum of 20 Indicators improved from -2 to -1 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations slipped from +21 to +17. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
It still looks like we are headed for a pullback, but I’m
guessing it won’t be too dramatic. I don’t like to guess, so we’ll just have to
watch the indicators. If signals keep
heading down, I’ll be cutting stock holdings. So far, I don’t have any topping
indicators that have signaled a sell.
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 15
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
We haven’t got any top-indicators calling “sell” now,
but we must remember that these indicators frequently don’t signal a top. They are best when the market climbs to a
blow-off top.
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…
Intel (INTC) has been the best performer in the Dow over
the last 2 months. It may be a stock to consider after we figure out where this
correction is going.
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; the SENTIMENT,
VIX and VOLUME indicators were neutral. Overall, the Long-Term Indicator
remained Neutral/HOLD.
