Market Update for September 16th, 2019
There is so much noise out there today, sometimes you just need to mute it,
and focus on what's important. The Data!
Today's agenda, big charts, Treasury's current signals, what keeps me up at night and of course, we will discuss oil after what happened this weekend and what is on my radar with our game plan going forward. What does this all mean to you as an investor? Let's go to the big charts.
First up, S&P index daily chart. Why? Because everybody knows the S&P, but please…. The market is much bigger than that. So, what do we see here? Two weeks ago, on our video, we talked about this box forming that could go either way. Well, it went up. What did it go up on? Nothing. Absolutely nothing. Trade, China? NO! Everyone knows this is not going to happen. We went up on false pretenses. Volume was declining, momentum is up and then we're hanging there at 15 on the VIX. Really nothing has changed. This is positive today.
Don't forget, every week we releaser signals, as they can change on a day's notice. Most importantly, I do not make changes on daily charts. One of the reasons is when you look here a little bit closer, we were stuck in this box. I'm not surprised at that although we are positive, but we have a negative view, that’s why we are going to end back up in the box before you know it.
Next up is our weekly chart, any change? Not really, we still haven't had a true positive turn over on momentum, you can see that wedge, that wedge is going to be answered. we're barely in it right now. Let's see what happens. We'll wait to the end of the month. But as of today, that is still negative.
Our last one is our monthly view, which gives us an idea for the long-term picture. We have spoken about this before; you have to be careful here. We're up right here at all-time highs. But this is the most important part of it. Relative strength of the market. Each time we've had highs, it's been a series of lower highs that is called negative divergence.That is another reason why I continue to be negative on the long term.
Now to take a quick picture of the background. Whoa, look at all of that information! This shows Advance stocks minus not declining, Stocks divided by total issues, So the S&P highs minus lows divided by 500. When you look over here the most recent time, look at that weakness, the weakness is unbelievable across the board in all aspects. We're just not seeing that surge. Another reason why I still don't believe the most recent move up to the top.
Moving on to Treasuries. Yes, we had a big move to the downside and we just had a big move to the upside. When you're looking at where we are from just a couple weeks ago, a real big move. Now, that being said, has anything changed as far as I'm concerned? No! We trimmed our treasury position about a month or so ago now for new clients, I bought into it last week. I might add as we go into this week, because again, when you look at everything that's going on, I still believe we will go lower AGAIN on treasuries.
What keeps me up at night. I have added oil because of what happened this weekend. I ran bond, Saudi Arabia, one of their refineries, not only their largest refinery, the world's largest refinery. This is a big-time geopolitical risk. I had an opportunity to be in a webinar this morning with an energy specialist, Great call. Bottom line is, retaliation is going to come. So, oil right now, is up 10 percent roughly today. But be careful folks. You're still in a downtrend here. I am personally going to stay away from oil when you have this type of geopolitical risk. You have to be careful. This is a big deal. There is a lot of speculation. Did Russia push Iran to do it? Is China behind it? Who does the Saudi work with? Did they do it themselves? Do they work with their allies like the U.S. to combat? In fact, possibly retaliate? With all of this, I am really going to continue to watch what happens in this sector.
Let me move over to some of my daily data points. As I said in the beginning, DATA DATA DATA! You can't just look at this market, it's gone up…. with what?? Not the data, that's for sure. We peaked in Q 3 2018. You can see it’s all green, good numbers. We've gone down from there. Wait, just wait another five weeks for earnings. All this stuff that's going on, it is going to be worse. Retail headline, retail, industrial production, you name it, we have peaked.
Here's our earnings and sales growth. Obviously, if we feel we have peaked, we peaked in earnings. When you buy a stock, when you buy the market, when you buy an index through an ETF, you're buying based on future earnings and growth. We have peaked again. Wait until we get to the next quarter.
Some of the data when we look at it, CPI, PPI, this is what the Fed has been looking for. So, we have in fact had a turn up on inflation. That is the next part of our cycle that we are expecting. How about auto sales? You can see that slow line grind down, we really have not had big auto sales. Most importantly, you can see auto delinquency. We are now back at levels of 2009. What does that mean to you as an investor? People are starting to have problems paying their bills.
Manufacturing activity is likely to remain underwhelming. This shows recession in gray. As they say, the trend is not your friend.This is a big sign…. Manufacturing. We can look at small business optimism. It is the same thing, when did we peak? 3rd quarter 2018. We've gone down.
I have a digital journal on my iPad, every morning I like to track everything from around the world. This is this morning's information. Most of the reds are China. Their number is at a 17-year low, they are really struggling big time right now.
Moving on to what's on my radar. A couple things…. Health Care. It just can't get out of its own way, it is stuck. the blue line is your 50-day moving average. It does not want to go above that blue line. Health Care just can’t seem to break the trend line. I am hoping to see a breakout soon.
Let’s revisit Gold. I’ve had a few people ask; how come we’re not selling gold right now? Well, I actually sold, and cut my position about a month ago, and then added it again last week. Why? We were looking for that pullback and we got it. Discipline is a major part of my process. You set a price target and you go with it.
I like to save the best for last. This is the large value index
My core holding is split between large cap growth and large value. Those are two of my biggest positions. It has done really nothing; it’s been stuck in a rut. Yeah, it's gone up year to date, like a lot of things, but it has really gone nowhere. All of a sudden last week, another change in the cycle, a rotation out of high beta growth into more value-oriented plays. We are up well over 10% in a week and a half. That's why you have to have patience. If you believe you have the conviction, you've got it in there. Patience is the key to making good decisions.
Lastly, fear and greed. No surprise, everyone has become greedy again….FOMO (Fear of Missing Out) All CNBC has talked about is… Buy Buy Buy! With no fundamentals or data behind it. So, it's not surprising to see our greed at 75 when just two weeks ago we were at 23.
Indicators positive, short term with a negative bias, two others are negative. So, what does that mean to you as an investor? I am staying put. I'm waiting, unless I see that window for treasuries, then I'll add to that position.