CONSUMER CONFIDENCE (Conference Board)
The Conference Board Consumer Confidence Index® declined
marginally in August, following July’s rebound. The Index now stands at 135.1
(1985=100), down from 135.8 in July… “Consumer confidence was relatively
unchanged in August, following July’s increase,” said Lynn Franco, Senior
Director of Economic Indicators at The Conference Board. “Consumers’ assessment
of current conditions improved further, and the Present Situation Index is now
at its highest level in nearly 19 years (Nov. 2000, 179.7). Expectations cooled
moderately, but overall remain strong. While other parts of the economy may
show some weakening, consumers have remained confident and willing to spend.
However, if the recent escalation in trade and tariff tensions persists, it
could potentially dampen consumers’ optimism regarding the short-term economic
outlook.” Press release at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1.1% to 2878.
-VIX rose about 5% to 20.31.
-The yield on the 10-year Treasury slipped to 1.472%.
We have a lot of bearish signs:
-We can’t like the new-high/new-low data. Today, 130
issues made new-highs on the NYSE while 209 Issues made new-lows. When one
examines new-high/new-low data, they should not both be high. These are bad
numbers and the Fosback High/low logic long-term indicator is issuing a “big
drop” warning and the short-term number is negative, too. We remember that this
indicator was the only one to call the top (to the day) before the 20% correction
last year.
-MACD of Breadth is bearish. If the signal line drops below zero that is
an outright sell.
-MACD of S&P 500 price is bearish.
-XLU is outperforming the S&P 500.
-XLI is underperforming the S&P 500.
-My daily sum of 20 Indicators dropped from -8 to
-13 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from -33 to
-36. (These numbers sometimes change after I post the blog based on data that
comes in late.) Most of these indicators are short-term. -13 is a very bearish number.
We must be concerned. Remember the CASS Information Systems
comment:
“When the December 2018 Cass Shipments Index was negative
for the first time in 24 months, we dismissed the decline as reflective of a
tough comparison. In January and February 2019, we again made rationalizations.
When March was also negative (-1.0%), we warned that we were preparing to
“change tack” in our outlook; when April was down (-3.2%), we said, “we see
material and growing downside risk to the economic outlook.” With the -5.9%
drop in July, following the -5.3% drop in June, and the -6.0% drop in May, we
repeat our message from last two months: the shipments index has gone from
“warning of a potential slowdown” to “signaling an economic contraction.”
Report at…
Still, there are bright spots in the stock market. One of the simplest things I follow (and it’s
not one of my indicators) is how many of the DOW stocks were up over the
last 10-days. At the 12 August bottom, only 33% of the Dow stocks had closed in
positive territory over the previous 10-days.
Now after 3 weeks of up and down movement, we are about 1% higher on the
S&P 500, but (as of Tuesday, today) 52% of the Dow stocks had positive
closes over the last 10-days. That’s a big improvement. We need to hope it will
continue.
The chart, too, shows a triple bottom in the general
region of 2841. The chart looks bullish to me even though my indicators aren’t.
The index would need to close below 2841 with
deteriorating internals before I get too worried. For the time being though, I
remain cautiously optimistic.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2
-The Long-term Fosback Logic Index short and long-term indicators
were bearish.
- Most Recent Day with a value other than Zero: -2 on 27
August.
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
MOMENTUM ANALYSIS:
Just a reminder…During corrections, momentum is
generally not giving a very accurate picture, or at least it is giving a
correction picture – it will change significantly when the correction ends.
During the correction, Utilities will generally outperform as will similar Dow
stocks, like Verizon. Momentum here is a short-term call.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals dropped
to NEGATIVE 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 20 August 2019. This is a conservative balanced position
appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday,
the VIX and VOLUME indicators were negative; SENTIMENT and PRICE Indicators
were neutral. Overall, the Long-Term Indicator switched to SELL. As previously
noted, since we are already close to re-testing the correction low, I see no
point in exiting the market until we see a break below the prior low (2841) with
deteriorating signs. I’ll remain fully invested for the time being.
