If you looked at Friday’s blog you probably noticed that
I reversed the Charts for PE and ISM Manufacturing as well as a typo or
two. Sorry about that, but it happens.
Busy day for me, so we have a late post…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“We forecast that US GDP growth will be moderate at 1.7%,
but that a resilient labor market and robust consumer spending will uphold the
expansion at least through the presidential election. Although it is rare for
recessions to begin in an election year, multiple dynamics will cause us to
sharpen our pencils when assessing our economic outlook post-election. Our
real-time indicators suggest a small probability of recession over the next twelve
months, so closely monitoring them will be crucial should the economy’s
ground-breaking run start to halt.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.4% to 3246.
-VIX slipped about 1% to 13.85.
-The yield on the 10-year Treasury rose to 1.82.
Today’s Volume was in line with the average volume for
November or about 5% above the average for last month. Now everyone is back to
work. I thought the Pros might be selling Monday, especially since we saw a
number of top indicators recently. That didn’t happen today. It still looks like the S&P 500 all-time
high of 3258 Thursday was a short-term high.
We’ve seen a number of top indicators calling a top, so my call has
nothing to do with the situation in the middle east. Still, Mr. Market has a mind of his own and
there is no point fighting the Market or the FED. If the high of 3258 is taken
out, I’ll have to cover my short-position.
BEAR SIGNS
-My MACD of Breadth remains bearish today. MACD of S&P 500 price is close to
bearish, but at the moment, it is still in bull territory.
-Breadth vs the S&P 500 index indicates that the
Index is too far ahead of most stocks on the NYSE.
-New-highs are falling.
-Money Trend is falling.
-Divergence between Breadth and the S&P 500 is bearish.
This is a very good Top Indicator. It says we’re at a top, or close to it.
-The S&P 500 is too far above its 200-dMA when sentiment
is considered. (It is 8.3% above the 200-dMA without sentiment included; the
sell here is 10-11%, so the markets can go higher. Actually, markets can always
go higher than “normal” past pullbacks. The S&P 500 was 14% above its
200-dMA on 26 Jan 2018 at the top before the 20% correction.)
-Cyclical Industrials are underperforming the S&P 500
suggesting investors are worried. In a healthy market, cyclicals would be outperforming.
BULL SIGNS
-Up moves have been bigger than down moves over the last
month.
-Smart Money (late day action) has been up recently and that
will be important to watch if Smart Money continues to buy.
-The 5-10-20 Timer is bullish; the 5-dEMA and the 10-dEMA
remain above the 20-dEMA of the S&P 500.
Most other signs are neutral, most notably, VIX, Bollinger
Bands and RSI.
My daily sum of 20 Indicators improved from -4 to
-1 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations declined from -4 to -9
(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 remain bullish in the long-term; short-term, it looks
like we are in for a bit of a pullback. We’ll see.
Any pullback should be small: there were a decent number
of new-highs when the S&P 500 made its all-time high recently; the Fosback
New-High/New-Low Logic Index remains much closer to a buy than a sell.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2
Most Recent Day with a value other than Zero: -2 on 6
January (Divergence between Breadth and the S&P 500 is bearish; 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.
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 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
Monday, the PRICE indicator was Bullish; VIX,
VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator
remained to HOLD.
