HOUSING (Reuters)
“U.S. homebuilding fell for a third straight month in July
amid a steep decline in the construction of multi-family housing units, but a
jump in permits to a seven-month high offered hope for the struggling housing
market.” Story at…
MICHIGAN CONSUMER CONFIDENCE (MarketWatch)
“A measure of consumer confidence fell in August to the
lowest level since the start of the year…The consumer sentiment survey fell to
92.1 this month from 98.4 in July, according to a preliminary
reading from the University Michigan…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.4% to 2889.
-VIX dropped about 13% to 18.47.
-The yield on the 10-year Treasury rose to 1.560%.
As is often the case, signals were not clear-cut Friday. Friday
looked like a upside reversal and that would make Thursday the bottom: The
S&P 500 jumped 1.4%; up-volume was very high; 79% of stocks on the NYSE
advanced; new-highs outpaced new-lows by 96; Smart Money turned up based on
late-day-action.
When we look in more detail, reversal-signals were missed,
but not by much.
(1) 89% of the volume on Friday was up-volume, making it
a 90% upside-day except that it missed the momentum test to make it a reversal-day. We needed to see a close within the top 10% of the daily range to meet the
Lowry Research upside-reversal-day criteria. The Index closed 17% off the top
of the daily range – too low to qualify as a reversal-day.
(2) New-high new-low made a nice improvement, but the
standard deviation of the improvement was slomewhat less than my criteria
requires for a reversal.
(3) MACD of Breadth is still headed down. This is a
fairly responsive indicator for spotting reversals, but it hasn’t signaled a
reversal yet.
(4) At the test of the low on Wednesday, we did not get a
buy signal, so the possible reversal raises questions whether it was simply another tweet-driven bounce, or a real reversal.
There are plenty of Bear signs still in effect:
The McClellan Oscillator is still negative and that means
the bearish Hindenburg Omens and Fosback indicators we’ve seen recently are
still in effect. The long-term and Short-term Fosback indicators are still
giving a sell-signal, “sharp-drop” warning. (These indicators are
based on a 50-deMA and 10-dEMA respectively so they won’t turn on one day’s
data. They could be signaling the drop we’ve already seen.) Money Trend was
still falling. The long-term moving average of new-highs is still falling. MACD
of S&P 500 price is still headed down.
Overall, my daily sum of 20 Indicators improved
from -13 to -5 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations improved
from -111 to -106. (These numbers sometimes change after I post the blog based
on data that comes in late.) Most of these indicators are short-term.
I’d guess there’s maybe a 50-50% chance the bottom is in,
but signals aren’t lining up. Rather than guess, I’ll wait another day to see
what happens. Another high-volume, up-day (say 80% up-volume) would make me a
buyer.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
- Breadth vs the S&P 500 is extended for 5-days so it
was negative; both Long-term and Short-term Fosback Logic Index indicators remain
bearish.
- Most Recent Day with a value other than Zero: -3 on 16
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 not
giving a very accurate picture – it will reverse 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…
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 30% invested in
stocks as of 5 August 2019.
INTERMEDIATE / LONG-TERM INDICATOR
Friday,
the VOLUME, VIX, SENTIMENT and PRICE Indicators were neutral. Overall, the
Long-Term Indicator improved to HOLD.
