“The number of people who applied for jobless benefits in
mid-September rose slightly — largely reflecting a General Motors worker strike
in Michigan — but the level of new “claims” nationwide remained near a 50-year
low. Initial jobless claims, a rough way to measure layoffs, increased by 3,000
to 213,000 in the seven days ended Sept. 21…”
GDP (CNBC)
“U.S. business investment contracted more sharply that
previously estimated in the second quarter and corporate profit growth was
tepid…Gross domestic product increased at an unrevised 2.0% rate in the quarter…”
AP SAYS INCOME INEQUALITY HIGHEST ON 50 YEARS (AP)
“The gap between the haves and have-nots in the United
States grew last year to its highest level in more than 50 years of tracking
income inequality, according to U.S. Census Bureau figures released Thursday.” Story
at…
My cmt: As explained in the AP article, this is based on
the Gini Coefficient.
Here’s a discussion of the GINI Coefficient that is used
to calculate “income inequality” from Investopedia.com.
“The Gini coefficient is an important tool for analyzing
income or wealth distribution within a country or region, but it should
not be mistaken for an absolute measurement of income or wealth. A high-income
country and a low-income one can have the same Gini coefficient, as long as
incomes are distributed similarly within each: Turkey and the U.S. both had
income Gini coefficients around 0.39-0.40 in 2016, according to the OECD, though Turkey's GDP per
person was less than half the U.S.'s (in 2010 dollar terms).”
So even though our “income inequality” is the same as
Turkey’s, we can suggest that the standard of living is twice as high here,
based on GDP. That may not be a great measure, but it points out the faulty
logic in the income equality argument - the lower income quintile is much better
off here than Turkey. Bangladesh has an income inequality coefficient of 32, much
lower than the U.S. Is Bangladesh a model economy?
The AP article does point out that most of the “income
inequality” problem in the US is caused by demographics and the greying
of the population; but that is at the end of the article and its conclusion
doesn’t go with the inflammatory, click-bait, headline.
As shown below, income inequality correlates to the
tremendous wealth creation during the Industrial revolution and again during
the Technology revolution.
Chart from…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 slipped about 0.2% to 2978.
-VIX rose about 0.7% to 16.07.
-The yield on the 10-year Treasury dipped to 1.698.
Not much changed today. Short-term indicators are
slightly worse. The Smart Money is still hinting at buying.
If a correction does begin, the 50-dMa is 2950. That’s an important point if we are to avoid
a correction. The 100-dMA is about 2922; 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 slipped from -3 to
-6 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from +27 to
+8. (These numbers sometimes change after I post the blog based on data that
comes in late.) A reminder: Most of these indicators are short-term.
I probably won’t make any drastic investment changes
unless I get a sell-signal from the long-term indicator. I took some profits in
a couple of trading positions today since the Short-Term indicator switched to
sell. It is just barely negative though,
and we may still see a bounce up.
I remain bullish, at least in the sense that this doesn’t
look like a major correction and we are far from certain there will be a
correction at all. I still think we go up from here, but as the saying goes, “Trade
what you see; not what you think.” Now, we see negative short-term indicators,
but this doesn't look like a major top.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
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
Thursday, the PRICE indicator
was positive; VOLUME, VIX and SENTIMENT and Indicators were neutral. Overall,
the Long-Term Indicator remained HOLD, but is now leaning Bullish.
