RECESSION INDICATOR FLASHES WARNING (Business Insider)
The spread between three-month and 10-year Treasury yields — a relationship known as the
yield curve — on Monday inverted to its widest level since 2007…such an
inversion has preceded every US recession of the past 50 years.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“The Energy Information Administration reported a
2.4-million-barrel build in crude oil inventories for the week to August 2,
shattering expectations of another sizeable draw… The EIA’s figures are also
unlikely to reverse the drop in oil prices…” Story at…
My cmt: Falling oil prices hurt the overall stock market,
because there are so many oil services companies in the Indices.
MARKET VALUATION (Advisor Perspectives)
“Our monthly
market valuation updates have long had the same conclusion: US
stock indexes are significantly overvalued, which suggests cautious
expectations on investment returns. In a "normal" market environment
-- one with conventional business cycles, Federal Reserve policy, interest
rates and inflation -- current valuation levels would be a serious concern.”
Commentary at…
BERKSHIRE HATHAWAY SENDING A SILENT MESSAGE (Motley Fool)
“…why has Berkshire's cash level risen to an all-time
record? The simple answer is…Buffett and his team don't see any intriguing
values at the moment. Another way of rephrasing this statement: Stock market
valuations aren't attractive.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.1% to 2884.
-VIX dropped about 3% to 19.53.
-The yield on the 10-year Treasury rose to 1.734%.
The S&P 500 was up a bit today so it’s always a point
that makes one feel good that maybe this pullback is over. Unfortunately, on the NYSE, decliners exceeded
advancers; down-volume exceeded up-volume; and there were 234 new-52-week-lows
with only 145 new-highs. These numbers lean
towards bearish and don’t support today’s slightly bullish result. There was
also very high unchanged-volume which suggests investor confusion; some think
it is suggests a direction change for the market – in this case, down. (I’ve
never found a clear relationship on that one, so we’ll see.)
There was no Hindenburg Omen at the close today. (We got
a Hindenburg Omen Monday.) It didn’t really matter, because once triggered, a
Hindenburg Omen remains in effect for 30-days or until the McClellan Oscillator
goes positive. Basically, we still expect a crash, or a big drop. (It’s called
the Hindenburg Omen for a reason.)
The long-term Fosback indicator is still giving a
sell-signal, “sharp-drop” warning. Both, 52-week, new-highs and new-lows are
too high and have been for an extended period.
Breadth vs the S&P 500 is giving a new warning that
the Index is stretched too far compared to advancing stocks. This is a good Top Indicator and is scary
since the Index has already fallen nearly 5%. This indicator says we’re at a
top now!
MACD of Breadth is still negative. MACD of S&P 500
price remains negative too.
The Smart Money is selling based on late-day action.
The Index is now 3.3% above its 200-dMA (2790) and that
is a point that might provide a stopping point for this pullback, but we don’t
really know. Based on some of our indicators, I suspect the Index will drop
lower than the 200-dMA.
Overall, my daily sum of 20 Indicators improved
from -15 to -13 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations declined
from -37 to -52. (These numbers sometimes change after I post the blog based on
data that comes in late.) Most of these indicators are short-term.
It still looks like we are headed down. We're just seeing a reflexive bounce that will probably end fairly soon.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
- Breadth vs the S&P 500 was negative; both Long-term
and Short-term Fosback Logic Index indicators were bearish.
- Most Recent Day with a value other than Zero: -3 on 7
Aug.
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
MOMENTUM ANALYSIS:
Just a reminder…During corrections, momentum is not
giving a very accurate picture. Utilities will generally outperform as will
similar Dow stocks, like Verizon.
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.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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 30% invested in
stocks as of 5 August 2019.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday,
the Panic Indicator and VOLUME indicators were negative. The VIX, SENTIMENT and
PRICE indicators were neutral. Overall, the Long-Term Indicator remains SELL. It was first sell on 5 August.
