THE TRADE WAR IS REALLY ABOUT DECOUPLING? (CNBC)
“…the Nikkei business daily reported on Aug. 28
that Google is
shifting its Pixel smartphone production to Vietnam from China starting this
year and that the company is also looking to shift some of its smart home
speaker assembly to Thailand…more than 50
other big names have moved out or scaled back. But the timing of
Google’s reported plans and how they seem to have affected Beijing can’t be
ignored…the benefits of American trade diversification and continued U.S.
economic strength are giving the Trump administration the gift of time…In the
end, simply looking out for U.S. security concerns above immediate economic
benefits might have been the point of this trade war all along.” Story at…
My cmt: It has been a mistake to rely on China for so
much of our manufacturing. But now, tariffs are forcing US companies to seek
manufacturing partners out of China – that’s good.
On another tack, if the global warming extremists were
paying attention, they would be calling for boycotts of Chinese manufactured
goods since China is responsible for 40% of the world’s greenhouse gas
production. If China had an incentive, they might reduce carbon emissions.
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“While economic headwinds are building (e.g., ISM
manufacturing in contraction), our expectation is that strong consumer
spending, a synchronized global easing cycle, and a president motivated by
reelection should help the economy avert a recession over the next 12 months.
Given record levels of negative yielding debt overseas, low (but still
positive) rates in the US have reduced the upside potential for bonds longer
term. In this low rate environment, US equity valuations are attractive,
especially if S&P 500 earnings approach the consensus ~$176 estimate for
2020.” – Larry Adam, CIO, Raymond James. Full commentary at…
HUSSMAN MARKET COMMENTARY EXCERPT (Hussman Funds)
“In my view, investors are on the cusp of yet another
very long period in which the stock market is likely to go “nowhere in an
interesting way.” The “interesting” part is more likely to begin with steep
losses than a further advance from these levels, but it will remain important
to monitor the behavior of market internals, particularly if market behavior
becomes uniformly constructive, in contrast to its current ragged condition. For
now, as I observed in 2000 and 2007 based on similar conditions, I believe that
the combination of hypervaluation and unfavorable market internals has opened a
trap door that is permissive of abrupt and severe market losses.” - John
Hussman, Phd. Commentary at…
My cmt: It’s hard to argue with the logic; it’s the
timing that has been the problem for the bears.
My indicators should get me out of the market before I sustain too much
damage (assuming there isn’t a 1987 event where the market dropped 22% in a day).
That’s why it is important to pay attention to stock allocation and not get
over invested in stocks, or at least, stick with an allocation with which you
are comfortable. We might be only a tweet or two away from a big drop.
As a retiree with 50% invested in stocks, a 20% plunge would
only take 10% out of the total portfolio.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was little changed at 2978.
-VIX rose about 2% to 15.27.
-The yield on the 10-year Treasury increased to 1.646%.
Internals looked very good today: 1809 issues on the NYSE
advanced while only 1132 declined; there were 188 new, 52-week highs and only 16
new-lows; and up-volume outpaced down-volume 2,936,000,000 to 1,174,000,000.
What’s not to like? Well, the S&P 500 was little changed. I’d expect the S&P 500 to try and catch
up tomorrow.
My daily sum of 20 Indicators increased from +3 to
+10 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from -13
to +4. (These numbers sometimes change after I post the blog based on data that
comes in late.)
I remain bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -1
-The Long-term Fosback Logic Index indicator was bearish,
but this indicator isn’t valid now because the McClellan Oscillator remains
positive.
- Most Recent Day with a value other than Zero: -1 on 9
September.
(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
generally not giving a very accurate picture, or at least it is giving a
correction picture – it will change significantly when the correction ends.
During the correction, Utilities will generally outperform as will similar Dow
stocks, like Verizon. Momentum here is a short-term call.
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.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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 55% invested in
stocks as of 20 August 2019. This is a conservative balanced position
appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VOLUME indicator
was positive; VIX, SENTIMENT and PRICE Indicators were neutral. Overall, the
Long-Term Indicator remained to HOLD.
