The following is my summary of our weekly market analysis:
Last
week showed some very short-term technical
improvement – my subjective view in “daily
chart character” — virtually across the board. The binary (objective) technical analyses
showed improvement in transportation stocks (recaptured their 200-day moving
average), in home builders (recaptured their 50-day moving average) and in the
positioning of the 50, 100 and 200-day moving averages for healthcare.
The
S&P 500 Index itself continues to exhibit strong technical trends. The
message being: probabilities suggest that the bull market has significant
room to run, once it completes what, at this point, appears to be healthy consolidation.
S&P 500 Index itself continues to exhibit strong technical trends. The
message being: probabilities suggest that the bull market has significant
room to run, once it completes what, at this point, appears to be healthy consolidation.
EFA
(foreign developed markets ETF) showed some improvement in “daily chart
character” as it rallied above 2017 support. The Asia Pacific region offered up
a weaker look, as VPL (Vanguard’s Asia Pac ETF) saw its 50-day moving average
cross below its 200, as well as my volume analysis flashing a near-term negative (distribution) signal.
(foreign developed markets ETF) showed some improvement in “daily chart
character” as it rallied above 2017 support. The Asia Pacific region offered up
a weaker look, as VPL (Vanguard’s Asia Pac ETF) saw its 50-day moving average
cross below its 200, as well as my volume analysis flashing a near-term negative (distribution) signal.
Emerging markets sport a mixed short-term picture, with
my volume analysis showing improvement (accumulation) in DEM (dividend-oriented
emerging markets ETF) and deterioration (distribution) in VWO (Vanguard’s
emerging market index ETF). VWO’s large exposure to China explains its
presently weaker look.
my volume analysis showing improvement (accumulation) in DEM (dividend-oriented
emerging markets ETF) and deterioration (distribution) in VWO (Vanguard’s
emerging market index ETF). VWO’s large exposure to China explains its
presently weaker look.
As
for bonds and gold: TLT (long-term treasury ETF) recaptured its 200-day moving
average, while gold is holding just above its 2018 low — with GLD (gold ETF)
showing better late-week volume action.
for bonds and gold: TLT (long-term treasury ETF) recaptured its 200-day moving
average, while gold is holding just above its 2018 low — with GLD (gold ETF)
showing better late-week volume action.
As for general
conditions, our macro index rose 7 points to a historically solid 54.76, with
the economic subindex up 4 points, financial stress unchanged and the financial
markets subindex up 8.7 points.
conditions, our macro index rose 7 points to a historically solid 54.76, with
the economic subindex up 4 points, financial stress unchanged and the financial
markets subindex up 8.7 points.
On the negative side:
Near-term sector results (as well as the improvement in bonds mentioned above) are
inconsistent with the otherwise bullish macro backdrop:
Near-term sector results (as well as the improvement in bonds mentioned above) are
inconsistent with the otherwise bullish macro backdrop:
1-month returns:
Utilities +9.1% (now
breakeven on the year)
breakeven on the year)
REITS +4.2% (now
up 1% on the year)
up 1% on the year)
Staples +4.0% (still
down 8% on the year)
down 8% on the year)
Financials -4.9% (now down 4.4% on the year)
Industrials -5.3% (now down 4.6% on the year)
Materials -3.6% (now down 3.4% on the year)
Tech -1.0% (still
up 11% on the year)
up 11% on the year)
Back on the positive
side: Our recent increase in our telecom target (been gradually bumping it up
within portfolios) has been paying off… +3.3% over the past month…
side: Our recent increase in our telecom target (been gradually bumping it up
within portfolios) has been paying off… +3.3% over the past month…
In summary: I
don’t see the recent rotation to defensive sectors by itself as huge cause for concern, given the presently bullish macro
backdrop and the strong longer-term technical
setup for the broader market — clearly, it reflects trade fears (which of course
means it could persist awhile). That said, it could morph into a legitimate
rotation if indeed a protracted trade war ensues*, as that scenario would present
a major/damaging headwind for the macro backdrop; in which case – at the point where probabilities favor a
contraction ahead — we’d be following suit…
don’t see the recent rotation to defensive sectors by itself as huge cause for concern, given the presently bullish macro
backdrop and the strong longer-term technical
setup for the broader market — clearly, it reflects trade fears (which of course
means it could persist awhile). That said, it could morph into a legitimate
rotation if indeed a protracted trade war ensues*, as that scenario would present
a major/damaging headwind for the macro backdrop; in which case – at the point where probabilities favor a
contraction ahead — we’d be following suit…
*Given the political risk, a protracted trade war remains
a low-probability event. That said, it appears as though the Administration
believes that, at the moment, it plays well for the mid-term election.
a low-probability event. That said, it appears as though the Administration
believes that, at the moment, it plays well for the mid-term election.