GDP - Adv
“GDP rose 2.1% in the second quarter, down from 3.1% in
Q1. The growth was better than Wall Street estimates for a 2% gain.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.8% to 3026.
-VIX dipped about 5% to 12.16.
-The yield on the 10-year Treasury slipped to 2.074%.
The % of stocks making new-highs today was 6.7% while the
S&P 500 made a new high. This is a decent number that shows there is still
decent breadth at today’s new all-time high.
We can also measure breadth directly as the % of issues
advancing on the NYSE. If we look at the last 4 all-time highs, we have seen
the 10-dMA of %-issues advancing fall from 57.5% on 12 July to 52% Friday. It’s
still above 50% (indicating that most stocks have advanced over the last
10-days) so this is not too much of a concern.
There was an unusual indicator that flashed today –
Bollinger Squeeze. Here’s what stockcharts.com has to say about the Bollinger
Squeeze:
“The Bollinger Band Squeeze occurs when volatility falls
to low levels and the Bollinger Bands narrow. According to John Bollinger,
periods of low volatility are often followed by periods of high volatility.
Therefore, a volatility contraction or narrowing of the bands can foreshadow a
significant advance or decline.”
Since we have a number of stretched indicators, the most
likely move will be down. As noted previously, we still see plenty of signs
that a correction is coming.
The calm-before-the-storm indicator is still flashing a
warning. (This is a similar indicator to the Bollinger Bands.) 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 other important indicators giving a
warning. Breadth is lagging the S&P
500 by an amount that frequently signals a top. (The last time we had a sell
signal (20 Sep 2018) with this indicator, it signaled “sell” 8 trading-sessions
before the top.) A similar indicator (Money Trend vs the S&P 500) is also
stretched and warning of a top. 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 +2 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations slipped from +2 to -6. (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 bullish indicators, too, but it still looks
like a correction is coming.
How long do I hang on before cutting some stock holdings?
Bollinger bands and RSI will probably signal the top if other indicators remain
negative.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
Most Recent Day with a value other than Zero: -3 on 26
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator; 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…
FRIDAY 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
Friday, the PRICE and VIX indicators were positive; the
SENTIMENT and VOLUME indicators were neutral. Overall, the Long-Term Indicator
is BUY. The indicator is designed to signal Buy after a bottom. At this point, it just means that conditions
have been bullish; I think they may be too bullish and a decline is likely to
be coming.
