“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
THE PHONY DEBT CEILING CALAMITY (WSJ)
“With the U.S. Treasury predicted to run out of cash (the “X date”) as early as June 1, Treasury Secretary Janet Yellen has started warning of an “economic calamity” if Congress doesn’t raise the statutory debt limit...These claims are dangerously misleading.
Hitting the X date won’t cause a default on the national
debt. Debt-service payments have a feature that most other government payments
lack: When the government pays off maturing debt, the amount of debt subject to
the statutory limit declines. This means that the government can “roll over”
such obligations—that is, issue new debt to pay off old debt—without violating
the debt limit.
...It is a matter of public record that the Treasury made
such a plan during a 2011 showdown over the debt limit, when one official
explained that “the principal on Treasury securities that are maturing would be
funded by having auctions that would roll over those maturing securities into
new issues, so the new issues would be able to fund the redemption of the
maturing securities.”
For a similar reason, hitting the X date need not stop
Social Security and other payments that come from federal trust funds....
...The X date still presents uncertainty, and we don’t want to appear pollyannaish. But...it may well be that hitting the X date—and a short lapse in the government’s ability to raise revenue—looks like a temporary government shutdown that follows an appropriations lapse.” - and Mr. Clarke is an incoming associate professor at the Washington University in St. Louis School of Law. Ms. Shapiro practices appellate and constitutional law in Washington and is a senior fellow at the Independent Women’s Forum.
https://www.wsj.com/articles/the-phony-debt-ceiling-calamity-x-date-default-social-security-roll-over-treasury-ac939d83
My cmt: When I began working in Government, the permits program was included in the same appropriation as Operation & Maintenance of civil works facilities such as dams, locks, or bridges. When there was a threat of appropriation shortfall, my boss would direct that we cut the Permits Program so the public would be impacted and would harass Congress to increase funding. But there were plenty of cuts that could have been made with no impact to the public. For example, we could have deferred some maintenance on various projects. The same BS is going on now. If the debt ceiling isn’t raised, spending on discretionary projects could be delayed, such as the Infrastructure Bill (among others), so that Social Security and other non-discretionary expenditures would continue until a debt ceiling agreement could be reached. But cutting Social Security scares people, so that’s all we hear about.
CONSUMER CONFIDENCE (Conference Board)
“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy... While consumer confidence has fallen across all age and income categories over the past three months, May’s decline reflects a particularly notable worsening in the outlook among consumers over 55 years of age.” Report at...
https://www.conference-board.org/topics/consumer-confidence/press/CCI-May-2023
PE RATIOS FOR THE S&P 500 (multpl.com)
“Current S&P 500 PE Ratio: 24.34 +0.31 (1.30%)
4:00 PM EDT, Fri May 26
Price to earnings ratio, based on trailing twelve month
“as reported” earnings.”
https://www.multpl.com/s-p-500-pe-ratio
My cmt: We keep hearing Pundits suggest that high PEs
will derail the current rally, but PEs were much higher before the 2000 dot.com
crash - around 34. (The extreme highs in the above chart were during recessions
when earnings fell faster than prices.) It seems to me that PEs can go much
higher than they are now. There are more
investors chasing fewer stocks. I don’t remember much from Econ I, but when
demand is strong and supply is low, prices go up.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was little changed at 4206.
-VIX slipped about 3% to 17.48.
-The yield on the 10-year Treasury slipped to 3.703%.
PULLBACK DATA:
-Drop from Top: 12.3%. 25.4% max (on a closing basis).
-Trading Days since Top: 352-days.
The S&P 500 is 5.8% ABOVE its 200-dMA and 2.4% ABOVE its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area and we called a buy on 4 October 2022.
MY TRADING POSITIONS:
I am not trading as much as in the past. You may wish to use the momentum charts and/or the Monday 40-day gain charts for trading the Dow stocks and ETFs.
MSFT – Microsoft.
XLK – Technology ETF.
XLE – Energy Sector ETF. XLE tested its March low on 16 May on lower volume so I continue to hold it.
XLY - Consumer Discretionary ETF.
KRE – Regional Banking ETF. This is a very small position
for me. KRE tested the May 4 low of 36.08 on much lower volume 11 & 12
May.
SHY – Short term bonds. 30-day yield is 4%. (Trailing
1-year yield is 1.6%.) I’ll hold this, but if the market retests the lows, I’ll
sell it and buy stocks.)
TODAY’S COMMENT:
Breadth continues to be stubbornly weak. The 10-dMA of the % of issues advancing on the NYSE remains below 50% and today it dropped to 47.2%. The good news is that, so far, both the 50-day and 100-day moving averages remain above 50%. 50% is an important benchmark because, if the moving average drops below 50%, it means that less than half of all issues have gone up over the time frame of the moving average. Stated more simply, over the last 2 weeks most issues have gone down.
The daily spread of 20 Indicators (Bulls minus Bears) declined
from -3 to -6 (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations declined from -14 to -18.
(The trend direction is more important than the actual number for the 10-day
value.) These numbers sometimes change after I post the blog based on data that
comes in late. Most of these 20 indicators are short-term so they tend to
bounce around a lot.
LONG-TERM INDICATOR: The Long Term NTSM indicator
remained HOLD: PRICE is positive; SENTIMENT, VIX & VOLUME are neutral.
(The important BUY in this indicator was on 21 October,
7-days after the bottom. For my NTSM overall signal, I suggested that a
short-term buying opportunity occurred on 27 September (based on improved
market internals on the retest), although without market follow-thru, I was
unwilling to call a buy; however, I did close shorts and increased stock
holdings. I issued a Buy-Signal on 4 October, 6-days before the final bottom,
based on stronger market action that confirmed the market internals signal. The
NTSM sell-signal was issued 20 December, 8 sessions before the high of this
recent bear market, based on the bearish “Friday Rundown” of indicators.)
Bottom line: I remain a Bull.
ETF - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:
The top ranked ETF receives
100%. The rest are then ranked based on their momentum relative to the leading
ETF.
*For additional background on the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
DOW STOCKS - TODAY’S MOMENTUM RANKING
OF THE DOW 30 STOCKS (Ranked Daily)
DOW 30 momentum ranking follows:
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…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
TUESDAY MARKET INTERNALS (NYSE
DATA)
My basket of Market Internals
remained HOLD. (Market Internals are a decent
trend-following analysis of current market action, but should not be used alone
for short term trading. They are most useful when they diverge from the Index.)
“With the U.S. Treasury predicted to run out of cash (the “X date”) as early as June 1, Treasury Secretary Janet Yellen has started warning of an “economic calamity” if Congress doesn’t raise the statutory debt limit...These claims are dangerously misleading.
...The X date still presents uncertainty, and we don’t want to appear pollyannaish. But...it may well be that hitting the X date—and a short lapse in the government’s ability to raise revenue—looks like a temporary government shutdown that follows an appropriations lapse.” - and Mr. Clarke is an incoming associate professor at the Washington University in St. Louis School of Law. Ms. Shapiro practices appellate and constitutional law in Washington and is a senior fellow at the Independent Women’s Forum.
https://www.wsj.com/articles/the-phony-debt-ceiling-calamity-x-date-default-social-security-roll-over-treasury-ac939d83
My cmt: When I began working in Government, the permits program was included in the same appropriation as Operation & Maintenance of civil works facilities such as dams, locks, or bridges. When there was a threat of appropriation shortfall, my boss would direct that we cut the Permits Program so the public would be impacted and would harass Congress to increase funding. But there were plenty of cuts that could have been made with no impact to the public. For example, we could have deferred some maintenance on various projects. The same BS is going on now. If the debt ceiling isn’t raised, spending on discretionary projects could be delayed, such as the Infrastructure Bill (among others), so that Social Security and other non-discretionary expenditures would continue until a debt ceiling agreement could be reached. But cutting Social Security scares people, so that’s all we hear about.
“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy... While consumer confidence has fallen across all age and income categories over the past three months, May’s decline reflects a particularly notable worsening in the outlook among consumers over 55 years of age.” Report at...
https://www.conference-board.org/topics/consumer-confidence/press/CCI-May-2023
“Current S&P 500 PE Ratio: 24.34 +0.31 (1.30%)
4:00 PM EDT, Fri May 26
|
Mean: |
16.01 |
|
|
Median: |
14.93 |
|
|
Min: |
5.31 |
(Dec 1917) |
|
Max: |
123.73 |
(May 2009) |
https://www.multpl.com/s-p-500-pe-ratio
-Tuesday the S&P 500 was little changed at 4206.
-VIX slipped about 3% to 17.48.
-The yield on the 10-year Treasury slipped to 3.703%.
-Drop from Top: 12.3%. 25.4% max (on a closing basis).
-Trading Days since Top: 352-days.
The S&P 500 is 5.8% ABOVE its 200-dMA and 2.4% ABOVE its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area and we called a buy on 4 October 2022.
I am not trading as much as in the past. You may wish to use the momentum charts and/or the Monday 40-day gain charts for trading the Dow stocks and ETFs.
XLK – Technology ETF.
XLE – Energy Sector ETF. XLE tested its March low on 16 May on lower volume so I continue to hold it.
XLY - Consumer Discretionary ETF.
Breadth continues to be stubbornly weak. The 10-dMA of the % of issues advancing on the NYSE remains below 50% and today it dropped to 47.2%. The good news is that, so far, both the 50-day and 100-day moving averages remain above 50%. 50% is an important benchmark because, if the moving average drops below 50%, it means that less than half of all issues have gone up over the time frame of the moving average. Stated more simply, over the last 2 weeks most issues have gone down.
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:
*For additional background on the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
DOW 30 momentum ranking follows:
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…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
