PPI (MarketWatch)
“The wholesale cost of U.S. goods and services rose
modestly in July, but inflation more broadly appeared dead in the water and
showed little sign it’s about to speed up. The producer
price index increased 0.2% last month…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.7% to 2919.
-VIX rose about 6% to 17.97.
-The yield on the 10-year Treasury rose to 1.748%.
The S&P 500 was slightly above the 50-dMA, but it
dropped below it today. This failure is somewhat bearish.
The McClellan Oscillator remained negative today so the
Hindenburg Omen we got Monday remains in effect. Once triggered, a Hindenburg
Omen remains in effect for 30-days or until the McClellan Oscillator goes
positive. Basically, this indicator is still calling for a crash, or a big
drop. (It’s called the Hindenburg Omen for a reason.)
The long-term and Short-term Fosback indicators are
still giving a sell-signal, “sharp-drop” warning. Both, 52-week, new-highs and
new-lows are too high and have been for an extended period.
Breadth vs the S&P 500 is still giving a warning that
the Index is stretched too far ahead of advancing stocks on the NYSE
(breadth). This is a good Top Indicator
and concerning since the Index is down 3.5% from its all-time high. This
indicator says we’re at a top now!
MACD of Breadth flipped bullish today, but just barely. We’ll
watch this further. It does flip flop
some during corrections on a strong advance. If it stays bullish, we’ll need to
pay attention.
MACD of S&P 500 price remains negative.
The Smart Money is still selling based on late-day action
over the last 10-days suggesting a downtrend is in place.
Overall, my daily sum of 20 Indicators declined
from -3 to -10 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations declined
from -57 to -69. (These numbers sometimes change after I post the blog based on
data that comes in late.) Most of these indicators are short-term.
We’ve now seen a pretty good cluster of -3 Top / Bottom Indicator
readings with one -4 reading, yesterday.
In the past this has occurred almost exclusively during corrections. This
further suggests that it is highly unlikely that this pullback ended 4-days
ago.
Until we see further evidence, it still looks like we are
headed down.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s
Reading: -3
- Breadth vs the S&P 500 was negative; both Long-term
and Short-term Fosback Logic Index indicators were bearish.
- Most Recent Day with a value other than Zero: -3 on 9
Aug.
(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. Utilities will generally outperform as will
similar Dow stocks, like Verizon.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
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%.
*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 Panic Indicator and VOLUME indicators were negative. The VIX, SENTIMENT and
PRICE indicators were neutral. Overall, the Long-Term Indicator remains SELL.
It was first “Sell” on 5 August.
