CASS FREIGHT INDEX DOWN AGAIN IN AUGUST (CASS Information
Systems)
“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 -3.0%
drop in August, following the -5.9% drop in July, -5.3% drop in June, and the
-6.0% drop in May, we repeat our message from last three months: the shipments
index has gone from “warning of a potential slowdown” to “signaling an economic
contraction.” August Report at…
EARNINGS RECESSION (MarketWatch)
“The S&P 500 is officially in an earnings recession
for the first time in three years, and the trend is expected to get worse in
the third quarter. The entirety of the S&P 500 index has reported
results for the second quarter, showing an average earnings drop of
0.35%.
LARRY ADAMS COMMENTARY EXCERPT (Raymond James)
“We forecast that the US economy will grow by 2.2% in
2019 and 1.7% in 2020. With a low probability of a recession over the next 12
months, risky assets such as equities should continue their ascent (S&P 500
2019 year-end target = 3,071).” – Larry Adams, CIO, Raymond James.
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“The bulls have tried twice to score new highs, but the
bears have put up a little resistance over the past two weeks. While I do not
believe the market is on the verge of a bear market or even a 10% decline,
risk/reward is no longer tilted strongly towards the bulls. And that’s okay.
FYI, next week [this week] is the weakest week of the year on an historical
basis for the stock market.” - PAUL SCHATZ, PRESIDENT, HERITAGE CAPITAL
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was essentially unchained at
2992.
-VIX dipped about 3% to 14.91.
-The yield on the 10-year Treasury rose to 1.729.
We have a Head and Shoulders pattern on the charts. The
left shoulder is the high back in April; the right shoulder is the recent high
on 12 September and the head is 26 July. The head and shoulders pattern is a bearish
sign, but it is not always a perfect predictor.
BEAR SIGNS
-RSI was bearish.
-Up-volume is headed down.
-New-highs are continuing to fall, so concerns remain.
-Smart Money is bearish too.
-Sum of Indicators is leaning bearish.
-Money Trend
-XLI is underperforming the S&P 500. Cyclicals should
out-perform in a bull market.
-XLU is outperforming the S&P 500. Utilities should under-perform the Index in a
Bull market.
NEUTRAL SIGNS
-Bollinger Bands.
-The MACD of Breadth is leaning bearish; it will give a
sell signal if the signal line drops below zero.
-Breadth vs the S&P 500
-MACD of S&P 500 price is leaning neutral but may turn
bearish soon.
-Smart Money is flat.
-5-10-20 Timer is neutral. The 5-dEMA and 10-dEMA are both
above the 20-dEMA of the S&P 500.
-VIX is neutral but leaning bearish.
-Volume is neutral.
BULLISH SIGNS
-Breadth as measured by the % of stocks advancing on the
NYSE.
-The size of up moves has been higher than down moves
over the last month.
If a correction does begin, the 50-dMa is 2951. That’s an important point if we are to avoid a
correction. The 100-dMA is about 2921; that was around the S&P 500 high in
2018. That’s about where we might expect
a pullback to end if we do get a downturn.
My daily sum of 20 Indicators dipped from +1 to -4
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations slipped from +71 to +57.
(These numbers sometimes change after I post the blog based on data that comes
in late.)
Today’s internals looked ok. While RSI is bearish,
Bollinger Bands were not, and I like to use these signals together. Overall, I’m
not convinced we’re going to see a correction, we’ll have to wait on the
markets. In the meantime, I remain bullish, at least until we see more bear
signs.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -1
RSI was bearish.
- Most Recent Day with a value other than Zero: -1 on 23
September.
(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)
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…
MONDAY 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 20 August 2019. This is a conservative balanced position
appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE indicator was positive; VOLUME,
SENTIMENT and VIX Indicators were neutral. Overall, the Long-Term Indicator
remained HOLD.
