“’Exit Rule for Bubbles’ is straightforward: You only get
out if you panic before everyone else does. You have to decide whether to look
like an idiot before the crash, or look like an idiot after it.” – John Hussman,
PhD.
DURABLE ORDERS (Reuters)
“New orders for key U.S.-made capital goods surged in
June, but will probably not change expectations that business investment
contracted further in the second quarter and contributed to holding back the
economy. The Commerce Department said on Thursday orders for non-defense
capital goods excluding aircraft, a closely watched proxy for business spending
plans, jumped 1.9% last month.” Story at…
JOBLESS CLAIMS (MarketWatch)
“The number of people who applied for unemployment
benefits last week fell to the lowest level in more than three months,
reflecting the persistent strength of a U.S. labor in which layoffs have fallen
to the lowest level in decades. Initial jobless claims, a rough way to measure
layoffs, dropped 10,000 to 206,000 in the seven days ended July 20…” Story at…
2019 STOCK MARKET ACTION BULLISH (See It Market)
“A rare event took place between the close on December
24, 2018 and the close on February 22, 2019…the percentage of NYSE stocks above
their 50-day moving average dropped below 12% and then rebounded to above
88%; a move that showed a significant shift in the perception of the stock
market’s longer-term potential…The historical cases [discussed in the article]
provide some context for the 2019 data we have in hand; data that continues to
tell us to keep on open mind about better than expected outcomes in the years
ahead…” Commentary at
My cmt: I'm skeptical - I'm not expecting huge returns from here. There are plenty who disagree with the above article. Here’s two…
INTERIM HUSSMAN COMMENT EXCERPT (Hussman Funds)
“Though we no longer adopt a bearish outlook in response
to extreme “overvalued, overbought, overbullish” syndromes when market
internals remain favorable, I believe that it is still important to track when
those syndromes emerge in the context of negative market internals, as we see
presently…
…as of Friday July 12, our estimate of likely 12-year
total returns for a conventional portfolio mix invested 60% in the S&P 500,
30% in Treasury bonds, and 10% in Treasury bills, has dropped to just 0.5%. A
passive investment strategy is now closer to “all risk and no reward” than at
any moment in history outside of the three weeks surrounding the 1929 market
peak…
…as I observed in my regular July comment...with the
exceptions of 1967 and 1996, every initial Fed easing (ultimately amounting to
a cumulative cut of 0.5% or more, following a period of tightening in excess of
0.5%), has been associated with a U.S. economic recession.” – John Hussman, PhD.
Commentary at…
CRESCAT CAPITAL QUARTERLY INVESTMENT LETTER Q2 2019 (Crescat
Capital)
“The downturn could be particularly brutal for US stocks
because we are record late in a fading economic expansion and at
historical high valuations relative to underlying fundamentals across a broad
composite of eight measures that we follow at Crescat.” Chart and discussion at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dipped about 0.5% to 3004.
-VIX rose about 6% to 12.74.
-The yield on the 10-year Treasury rose to 2.084%.
We still see plenty of signs that a correction/pullback is coming:
The calm-before-the-storm indicator is still flashing a
warning. Expect a one-day 2% or more, drop coming ahead, most likely within the
month. (This indicator is pretty good, but not perfect.)
In addition, we see other important indicators giving a
warning. Breadth is lagging the S&P
500 by an amount that frequently signals a top. (The last time we had a sell
signal (20 Sep 2018) with this indicator, it signaled “sell” 8 trading-sessions
before the top.) A similar indicator (Money Trend vs the S&P 500) is also
stretched and warning of a top. We also note that the Index is stretched ahead
of its 200-day moving average when sentiment is added to the equation.
My daily sum of 20 Indicators remained +2 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations slipped from +8 to +2. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
There are some bullish indicators, but it looks like a
correction is coming.
How long do I hang on before cutting some stock holdings?
Bollinger bands and RSI will probably signal the top if other indicators remain
negative. Another sign of a top would be a statistically-significant
up-day. That would probably be a 1% or
greater up-day.
I can't say whether this will be THE top; we may see just a run of the mill 5-10% pullback.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
Most Recent Day with a value other than Zero: -3 on 25
July (The S&P 500 was too far ahead of its 200-day average w/sentiment,
top-indicator; the S&P 500 is stretched relative to breadth; the Money Trend
Indicator is stretched relative to the S&P 500.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better 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.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
Intel (INTC) and now Apple (AAPL) and Goldman Sachs have
been the best performers in the Dow over the last 2 months. They may be stocks
to consider after we figure out where this correction is going.
THURSDAY 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 55% invested in
stocks as of 4 June 2019. This is based on the improved indicators 3 June and
my recommendation to increase stock holdings if we saw strong buying on 4 June.
As a retiree, I am conservatively positioned with a balanced portfolio. You may be comfortable with a higher % invested
in stocks – that’s OK.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the PRICE and VIX indicators were positive; the
SENTIMENT and VOLUME indicators were neutral. Overall, the Long-Term Indicator
is BUY. The indicator is designed to signal Buy after a bottom. At this point, it just means that conditions
have been bullish; I think they may be too bullish and a decline is likely to
be coming.
