EXISTING HOME SALES (MarketWatch)
“Sales of previously owned homes slipped 1.7% in June,
reflecting ongoing weakness in the U.S. housing market despite a sharp drop in
mortgage rates.” Story at…
CASS FREIGHT INDEX SUGGESTS RECESSION (CASS Information
Systems)
“Continued deterioration in the Cass Freight Shipments
Index concerns us…With the -5.3% drop in June following the -6.0% drop in May,
we repeat our message from last month: the shipments index has gone from
“warning of a potential slowdown” to “signaling an economic contraction.” One
can download the June report here…
ATA TONNAGE (American Trucking Association)
“American Trucking Associations’ advanced seasonally
adjusted (SA) For-Hire Truck Tonnage Index decreased 1.1% in June after falling
4% in May. In June, the index equaled 115.2 (2015=100) compared with 116.5 in
May.
“Tonnage continues to show resilience as it posted the twenty-sixth year-over-year increase despite falling for the second straight month sequentially,” said ATA Chief Economist Bob Costello. “The year-over-year gain was the smallest over the past two years, but the level of freight remains quite high. Tonnage is outperforming other trucking metrics as heavy freight sectors, like tank truck, are witnessing better freight levels than sectors like dry van, which has a lower average weight per load”…Compared with June 2018, the SA index increased 1.5%, the smallest year-over-year gain since April 2017.” Press release at…
“Tonnage continues to show resilience as it posted the twenty-sixth year-over-year increase despite falling for the second straight month sequentially,” said ATA Chief Economist Bob Costello. “The year-over-year gain was the smallest over the past two years, but the level of freight remains quite high. Tonnage is outperforming other trucking metrics as heavy freight sectors, like tank truck, are witnessing better freight levels than sectors like dry van, which has a lower average weight per load”…Compared with June 2018, the SA index increased 1.5%, the smallest year-over-year gain since April 2017.” Press release at…
TECHNICALLY SPEAKING (Real Investment Advice)
“Over the last couple of weeks, I have laid out the bull
and bear case for the S&P 500 rising to 3300, and the case for the Fed to cut rates...reliance on the Fed has led to a marked
rise in “complacency” by
investors in recent weeks despite a burgeoning list of issues…[further] the ratio of the “volatility index” as compared to the S&P 500 index is
near it’s lowest level on record going back to 1995. Combine
that with investors now completely back in the market, and you have the
ingredients for a decent short-term correction in the weeks ahead.” – Lance
Roberts. Commentary at…
My cmt: The lack of volatility is why my
“calm-before-the-storm” indicator is now flashing a warning. I doubt that we’ll
make it to 3300 before we see a pullback, but we’ll see.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.7% to 3005.
-VIX dropped about 7% to 12.61.
-The yield on the 10-year Treasury rose to 2.080%.
The calm-before-the-storm indicator is still flashing a
warning. Expect a one-day 2% or more, drop coming ahead, most likely within the
month. (This indicator is pretty good, but not perfect.)
In addition, we see another important indicator giving a
warning. Breadth is lagging the S&P
500 by an amount that frequently signals a top. I measure breadth as a % of
advancers, but many may prefer to consider this as a measure of advance-decline
vs the Index. This signal can be early or late.
Typically, it can be one or two weeks early. Last time we had a sell signal (20 Sep 2018), the
indicator signaled “sell” 8 trading-sessions before the top.
If that weren’t bad enough, we also note that the Index
is stretched ahead of its 200-day moving average when sentiment is added to the
equation.
My daily sum of 20 Indicators remained -1 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations slipped from +17 to +14. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
There are some bullish indicators, so all is not lost yet:
Late Day Action, the so-called Smart Money, has turned up.
New-high/new-lows are looking good too, except that the Fosback Logic Index is
getting elevated. That one warns when
new-highs and new-lows both are elevated.
That is a sign of an unhealthy market.
We’re not there yet, but it is higher than normal and rising – at this
point we’ll just be concerned.
Utilities (XLU) are under-performing while cyclical
industrials (XLI) are out-performing.
These are bullish signs.
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
keep watching. If signals keep heading down, I’ll be cutting stock holdings. It’s
a game of “chicken” now. How long do I
hang on before cutting some stock holdings?
My guess is that the markets will go higher and make
new-highs before we see a drop.
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 23
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator; and the S&P 500 is stretched relative to breadth.)
(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…
Intel (INTC) and now Apple (AAPL) have been the best
performers in the Dow over the last 2 months. They may be stocks to consider
after we figure out where this correction is going.
TUESDAY 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
Tuesday, the PRICE indicator was positive; the SENTIMENT,
VIX and VOLUME indicators were neutral. Overall, the Long-Term Indicator
remained Neutral/HOLD.
