GDP (MarketWatch)
“The U.S. economy grew a touch slower in the spring than
initially reported owing to declining exports and weak corporate investment,
but companies still posted the biggest increase in profits in five years even
as their business outlook dimmed. Gross domestic product, the official
scorecard for the economy, expanded at a 2% annual pace from April through June…”
Story at…
JOBLESS CLAIMS (Bloomberg)
“Filings for U.S. unemployment benefits dropped to a
four-week low, offering the latest sign of labor-market strength. Jobless
claims decreased by 12,000 to 209,000 in the week ended Aug. 17…” Story at…
THIS TIME IS NOT DIFFERENT (CNBC)
"Global interest rates are negative because the world
economy is heading toward a synchronized recession.” – Ron Insana. Story at…
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%.
-Thursday the S&P 500 rose about 1.3% to 2925.
-VIX dropped about 8% to 17.88.
-The yield on the 10-year Treasury rose to 1.497%.
Since the top on 26 July we’ve had two 90% down (volume)
days. Multiple 90% down-days are very bearish, until and unless, one sees
a reversal 90% up-volume-day, or rarely, back-to-back 80% up-volume days. We had a reversal indication on 16 and 19
August with two 80% up volume days; and today we had a second day in a row with
80% up-volume indicating another reversal. That’s very bullish and is a “correction
over” signal. That’s about all we need
to know today, so I won’t go into a lot of other extraneous details.
-My daily sum of 20 Indicators improved from zero
to +2 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from -21
to -6. (These numbers sometimes change after I post the blog based on data that
comes in late.)
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -1
-The Long-term Fosback Logic Index indicator was bearish,
but this indicators isn’t valid now because the McClellan Oscillator is
positive.
- Most Recent Day with a value other than Zero: -1 on 29
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained POSITIVE 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
Thursday, the VIX indicator
was negative; VOLUME, SENTIMENT and PRICE Indicators were neutral. Overall, the
Long-Term Indicator improved to HOLD. 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.
