Here’s the summary for our market/economic analysis for this week:
The Technicals (long-term trends)
Our long-term technical trend analysis remains notably bullish for the S&P 500.
Among cyclical sectors,
the home building space has waned of late (now officially neutral by our metrics), with the rest
still in their bullish trends.
the home building space has waned of late (now officially neutral by our metrics), with the rest
still in their bullish trends.
Among economically defensive
sectors, health care is strongly bullish, with staples neutral (after an
extended bearish period), telecom bearish, and utilities and REITs reading
neutral.
sectors, health care is strongly bullish, with staples neutral (after an
extended bearish period), telecom bearish, and utilities and REITs reading
neutral.
Non-US equities’
long-term trend metrics are reading neutral across the board.
long-term trend metrics are reading neutral across the board.
Our long-term trend
indicators continue to read notably bearish for bonds and gold.
indicators continue to read notably bearish for bonds and gold.
As for the
immediate-term, our daily chart character analysis (price and volume trends) shows the following:
immediate-term, our daily chart character analysis (price and volume trends) shows the following:
S&P 500: Neutral
Financials: Neutral
Tech: Bullish
Industrials: Bearish
Transportation:
Bullish
Bullish
Materials: Bearish
Consumer
Discretionary: Bullish
Discretionary: Bullish
Home Builders: Neutral
Global Commodities
Producers: Bearish
Producers: Bearish
Energy: Bearish
Health Care: Bullish
Consumer Staples:
Bearish
Bearish
Telecom: Bullish
Utilities: Bearish
REITs: Bearish
Bonds: Bullish
Gold: Neutral
The immediate-term
analysis shows a completely mixed overall picture. I.e., no clear risk-on/risk-off
bias.
analysis shows a completely mixed overall picture. I.e., no clear risk-on/risk-off
bias.
Fundamentals:
The PWA (macro) Index
scored 42.86, for its 5th straight weekly decline. Last week’s weakness was
concentrated in the Financial Markets subindex with the VIX curve and the
put/call ratio moving from bullish to neutral (denoting heightened risk-off sentiment).
scored 42.86, for its 5th straight weekly decline. Last week’s weakness was
concentrated in the Financial Markets subindex with the VIX curve and the
put/call ratio moving from bullish to neutral (denoting heightened risk-off sentiment).
The General Economy
and Financial Stress subindexes both came in unchanged for the week.
and Financial Stress subindexes both came in unchanged for the week.
In terms of valuation,
the S&P 500 looks reasonably valued, with tech
pushing the higher end of our fairly-valued range, while financials remain
notably undervalued. Non-US equities remain cheap virtually across the board.
the S&P 500 looks reasonably valued, with tech
pushing the higher end of our fairly-valued range, while financials remain
notably undervalued. Non-US equities remain cheap virtually across the board.
Summary:
While, clearly,
general conditions have waned a bit relative to the beginning of the year, the U.S.
economy remains strong.
general conditions have waned a bit relative to the beginning of the year, the U.S.
economy remains strong.
The odds of global
recession remain low, however, we are seeing a more (than in the U.S.) rapid waning of conditions
— in the aggregate — outside of the U.S..
recession remain low, however, we are seeing a more (than in the U.S.) rapid waning of conditions
— in the aggregate — outside of the U.S..
Given the global
nature of business in the 21st Century, the seemingly popular notion (in some circles) of late that a weakening
of conditions in other countries (especially China) somehow indicates that the
U.S. is winning on the trade front, or that we are immune to negative global
forces, is a faulty, and dangerous, opinion to hold — to say the least!
nature of business in the 21st Century, the seemingly popular notion (in some circles) of late that a weakening
of conditions in other countries (especially China) somehow indicates that the
U.S. is winning on the trade front, or that we are immune to negative global
forces, is a faulty, and dangerous, opinion to hold — to say the least!
Our view remains that
the political (career) devastation that would befall the perpetrators of a protracted
global trade war will ultimately inspire better thinking/acting. That said, the
current negative trajectory of general conditions (5 consecutive weekly declines in our macro index) has our attention; if the
powers that be wait too long to begin acting sensibly we could be facing
recessionary conditions such that a trade truce would not avert a significant
economic downturn.
the political (career) devastation that would befall the perpetrators of a protracted
global trade war will ultimately inspire better thinking/acting. That said, the
current negative trajectory of general conditions (5 consecutive weekly declines in our macro index) has our attention; if the
powers that be wait too long to begin acting sensibly we could be facing
recessionary conditions such that a trade truce would not avert a significant
economic downturn.
As for the
moment, conditions continue to suggest that we’re in expansion and bull market mode. However, per
the above, we’re keeping a very close eye on what, in the immediate-term, looks to be a somewhat less robust global macro
environment…
moment, conditions continue to suggest that we’re in expansion and bull market mode. However, per
the above, we’re keeping a very close eye on what, in the immediate-term, looks to be a somewhat less robust global macro
environment…