THE BIG FOUR RECESSION INDICATOR (Advisor Perspectives)
“There is…a general belief that there are four big
indicators that the committee [NBER Business Cycle Dating Committee] weighs
heavily in their [recession] cycle identification process. They are: Nonfarm
Employment; Industrial Production; Real Retail Sales; and Real Personal Income
(excluding Transfer Receipts) … Here is a percent-off-high chart based on an
average of the Big Four. The average of the four set a new all-time high in
November, previously set in October.” -
Jill Mislinsky.
Chart and discussion at…
WORST THING? UNDERWEIGHT EQUITIES (CNBC)
“The worst thing that clients and investors can do with
the market at current levels is pull the plug and go underweight equities,” she
told CNBC’s “Trading
Nation” on Friday. “There’s time left on the clock. We still think
there’s room for this market to move higher.” - Amanda Agati, Chief investment
strategist, PNC Financial. Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 jumped about 0.7% to 3288.
-VIX dipped about 2% to 12.32.
-The yield on the 10-year Treasury rose to 1.850.
Calm-Before-the-Storm indicator flashed a warning
today. This used to be a very reliable
bearish indicator. I used to short or even buy a VIX ETN when it warned,
because a rapid rise in the VIX and a drop in the S&P 500 almost always
followed. The only period in which it didn’t (and why I don’t put too much
faith in this indicator now) was when the FED was in its the QE mode. Now, the
FED is putting billions into the repurchase or “repo” market (about 61 billion
last night alone). I’m no financial whiz, but basically, they are buying and
selling treasuries and that is providing funds to banks. Although this isn’t
the same process as QE, the result seems to be the same. We also have the China Trade deal in the
offing; perhaps this is a sell-the-news when it happens. (The old “buy-the-rumor”
“sell-the-news” bromide.)
Today the S&P 500 closed 10.1% above its 200-dMA. The
10-15% zone is where we usually see a pullback and often at the lower end of
that range. The all-time high in the
last 10-years was 20% above the 200-dMA in September and October of 2009 as the
Index was coming off its crash bottom – over-exuberance was the correct call then,
but probably not now.
Once again, the S&P 500 closed at the upper
trend-line on a statistically significant up-day today. That just means that
the price-volume move exceeded my statistical parameters. Statistics show that
a statistically-significant, up-day is followed by a down-day about 60% of the
time. It also sometimes indicates a top – of course I have written something similar several
times over the past month or so.
The percentage of issues making new-highs on the NYSE at today’s
all-time high on the S&P 500 was 8.3%, well above the average for this
stat. This suggests a reasonably broad advance. I disagree with the “experts”
on CNBC who claim this is a narrow advance. Most of the DOW gain is probably
due to Apple, but we have seen decent new-high numbers on the NYSE at these
recent S&P 500 all-time highs.
My daily sum of 20 Indicators improved from +2 to
+6 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations improved from -20 to -13
(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.
To my surprise, the indicators have been getting better
over the last couple of days. One wonders how much longer that trend will last.
I remain bullish in the long-term; short-term, it looks
like we are in for a bit of a pullback - but I’m no longer trying to short it.
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: -1
Most Recent Day with a value other than Zero: -1 on 13
January (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)
*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.
