CPI (Marketwatch)
“American households paid more in July for goods and services
such as gasoline and rent to nudge inflation higher, but not enough to arouse
any worries or discourage the Federal Reserve from cutting interest rates again
soon. The consumer price
index rose 0.3% in July…” Story at…
ARUOBA-DIEBOLD-SCOTTI BUSINESS CONDITIONS INDEX (Philadelphia
FED)
My cmt: After a rough patch, it looks like ADS Business
Conditions have moved back to an average condition.
BOND BULLS (Real Investment Advice)
“In the next few quarters, we are likely going to deal
with an economic recession combined with a mean-reverting event in the
market. Another 50% correction, as we have seen previously, is very
possible due to the underlying debt and pension risk. While timing is always difficult, the
probabilities are very high.” Commentary at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1.5% to 2926.
-VIX dropped about 17% to 17.52.
-The yield on the 10-year Treasury rose to 1.704%.
(9-months ago the 10-yr. rate was 3.25%. The bond market seems worried about
the economy.)
I expected some improvement in the indicators, but instead, we got more of the same with a slight decline in indicators.
As noted previously, we had a Hindenburg Omen on 5
August. The last prior Omen was December 2014. That one preceded a long up and down period
before a 12% correction bottom more than 6-months later.
The McClellan Oscillator remained negative today so the
Hindenburg Omen we got last Monday remains in effect. Basically, this indicator
is still calling for a crash, or a big drop.
The long-term and Short-term Fosback indicators are 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 still giving a warning that
the Index is stretched too far ahead of advancing stocks on the NYSE
(breadth).
MACD of Breadth remained slightly bullish today. We’ll
watch this further. It does flip flop some
during corrections on a strong-advance, reflex rallies. If it stays bullish,
we’ll need to pay attention.
MACD of S&P 500 price remains negative.
The Smart Money is still selling based on late-day action
over the last 10-days suggesting a downtrend is in place, but the indicator is
flattening and may be reversing upward.
Overall, my daily sum of 20 Indicators slipped
from -9 to -10 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations declined
from -80 to -90. (These numbers sometimes change after I post the blog based on
data that comes in late.) Most of these indicators are short-term.
We’ve now seen a pretty good cluster of -3 Top / Bottom
Indicator readings with one -4 reading, last week and another today. In the past this has occurred almost
exclusively during corrections. This further suggests that this pullback is not
over. In addition, indicators actually deteriorated today.
Until we see further evidence, it still looks like we are
headed down. The test coming at 2845 (the recent low) will be an important
point to watch. Perhaps the pullback will end there? My guess is, “Probably
not,” but we won’t know until we get there. Could the correction be over? Yes,
and we’ll be watching that possibility too.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s
Reading: -4
- Breadth vs the S&P 500 was negative; both Long-term
and Short-term Fosback Logic Index indicators were bearish; the Money Trend indicator
is reaching severe lows compared to the S&P 500.
- Most Recent Day with a value other than Zero: -3 on 12
Augcent low)
(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. Momentum here is a sort-term call.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to 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
Tuesday,
the Panic Indicator and VOLUME indicators were negative. The SENTIMENT, VIX and
PRICE Indicators were neutral. Overall, the Long-Term Indicator remains SELL.
It was first “Sell” on 5 August.
