GDP (MarketWatch)
“The pace of growth in the U.S. economy was left at 2.1%
in the third quarter, as strong consumer spending was offset by weaker business
investment in inventories, in the final estimate from the Commerce Department
on Friday.” Story at…
PERSONAL INCOME / SPENDING (24/7WallSt)
“Personal income increased by 0.5% in November after
increasing by just 0.1% in October. Wages and salaries make up the largest
component of personal income, and this measure rose by 0.4% in November…” Story
at…
PCE PRICE INDEX (Reuters)
“Inflation was benign in November. Consumer prices as
measured by the personal consumption expenditures (PCE) price index rose 0.2%
last month, lifted by gains in energy goods and services prices.” Story at…
UNIV OF MICHIGAN SENTIMENT (Univ Michigan News)
“Consumer sentiment rose in the December 2019 survey to
near the top of the favorable range it has traveled during the past three
years, according to the University of Michigan Surveys of Consumers.” Story at…
HISTORY REPEATS WITH TRUMP IMPEACHMENT
(JonathanTurley.org)
“The Trump impeachment is even weaker than the Johnson [Andrew
Johnson, 17th President of the US] impeachment, which had an
accepted criminal act as its foundation. This will be the first presidential
impeachment to go forward without such a recognized crime but, like the Johnson
impeachment, it has a manufactured and artificial construct…With half of the
country opposing impeachment, the House is about to approve [now approved] two
articles of impeachment designed to play better On CNN than in the Senate.
Meanwhile, a lack of tolerance for constitutional objections is growing by the
day. Some critics have actually cited Johnson as precedent to show that
impeachment can be done on purely political grounds. In other words, the very
reason the Johnson impeachment is condemned by history is now being used today
as a justification to dispense with standards and definitions of impeachable
acts. One commentator has embraced the use of Johnson as precedent with a
statement that might make every “Radical Republican” from the 19th century
smile, saying, “At least they impeached the motherf—-r.”
Indeed, many Democrats seem to be taking away the wrong
lesson on impeachment from Johnson himself, who declared, “Whenever you hear a
man prating about the Constitution, spot him as a traitor.” This is how history
not only repeats itself, but repeats itself with a vengeance.” - Jonathan
Turley, Chair of public interest law at George Washington University and the
last lead counsel in a Senate impeachment trial.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 climbed about 0.5% to 3221.
(Another all-time high.)
-VIX rose about 0.1% to 12.51.
-The yield on the 10-year Treasury slipped to 1.918.
Santa might be leaving the stock market soon, at least
that’s what the indicators say. Now we
have 4 topping-indicators calling a top.
That’s usually about what it takes. The top indicators are: Bollinger
Bands were Overbought; RSI was overbought; the S&P 500 is too far ahead of advancing
issues on the NYSE (as it has been for the last 7 trading days); and the
S&P 500 is too far above its 200-dMA when sentiment is considered. It’s 9% above
tits 200-dMA without considering sentiment.
My daily sum of 20 Indicators remained +4 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations declined from +22 to +21 (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.
The rest of today’s blog will look familiar…
As I’ve written before (way too much it seems), we’re due
for a pullback, but I think any pullback should be relatively small – say down
to the 50-dMA (3091), about 3-5% lower than current values. A drop to the
100-dMA at 3013 is not out of the question since the 100-dMA is actually on the
lower trend line, but it seems like there is a lot of pent-up buying energy
that should prevent a big drop.
We also note that the Fosback New-High/New-Low Logic
Index is much closer to giving a Buy indication than a Sell indication. This is
just another sign that any selloff should be short-lived.
At today’s new all-time high we saw strong Breadth,
another sign of a market that is generally healthy, but somewhat extended.
I remain bullish in the long-term; short-term - it’s STILL
the broken record report - it still looks like we are in for a bit of a
pullback.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -4
Most Recent Day with a value other than Zero: -4 on 20
December (Bollinger Bands were Overbought; RSI was overbought; Breadth vs
S&P 500 is calling for a top; and
the S&P 500 is too far above its 200-dMA when sentiment is considered).
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher 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.
FRIDAY 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 60% invested in
stocks as of 7 Oct 2019 (up from 50%). This is a conservative balanced position
appropriate for a retiree. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the PRICE and VOLUME indicators were
Bullish; VIX and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator remained BUY. At this point it only means that conditions have
been good recently. The long-term
indicator is designed to signal a BUY after a bottom as conditions improve.
Sometimes it can signal a buy at a Top when conditions look good. At present, I
expect a small pullback so we are looking for a better buying opportunity.
