The calendar is modest, with the big reports all hitting last week. Investors will never have more up-to-date information on the economy, the Fed, corporate earnings and various risks than they do right now. It's hard to guess what punditry will do when you get an open slate. We should ask:
Should we fear a market stoppage?
Last week Recap
In last week's installment of the WTWA, I noticed the avalanche of relevant data, suggesting that it was time for some synthesis and analysis. I didn't think of any pundits help, which analyzed the piece as expected. I hope the readers did better by using my proposed framework. More about it below.
The story in a chart
I always start my personal review of the week by looking at a great chart. This week I'm with Jill Mislinski, packing a lot of relevant information into the weekly chart without sacrificing clarity.
In another quiet week, the market was almost unchanged. The trading area was only 1.8%. Volatility seemed higher for some, due to two-day decline following the Fed meeting. As always, our indicator image in the quantum below summarizes volatility and the VIX index in different time frames.
Wife. OldProf wants everyone a happy Star Wars Day (May 4 th for those who need a hint). RIP Peter Mayhew.
Every week I break the events in good and bad. For our purpose, "good" has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences to evaluate news – and you should too!
In the case, I include the expectations (E) and the previous reading (P).
New Deal Democrats' high-frequency indicators are an important part of our regular research. In his post this week, Further trend towards positive numbers could signal a renewed boom he reports that indicators in all time frames have become more positive. NDD remains skeptical and looks at indicators closely.
- Personal expenses repeated 0.9% even more than the expected 0.8% and P of 0.2%. But see personal income under the "bad" part.
- Core PCE recorded no increase over 0.1% expected and earlier. The overall index was up 0.2%.
- Profit growth remains strong. Brian Gilmartin describes positive changes in the S & P 500 estimates – now the management is taking over negative changes. John Butters (FactSet) updates earnings seasonally, which continues a beatrate higher than we have seen in the past five years. Here are sector breaks.
- Consumer confidence for April recorded 129.2 better than expected 125.3 and P of 124.2. Tailored analysis includes charts we have come to expect and the reasons for the decline. I enjoyed meeting their chief global strategist, George Pearkes, in the recent weeks National Association of Active Investment Managers meeting in Phoenix. George gave a nice presentation to the whole group and answered questions with aplomb.
- Factory order increased by 1.9% in March, and turned on expectations of 1.6% and much better than the February decline of -0.3%, revised from -0.5%.
- Waiting home sales jumped 3.8% in April, beating expectations at 1.1% and last month decline of -1.0%. Estimated Risk Reports and Comments on Seasonal Factors in Home Prices, which increased during the bubble, and have declined since.
- Q1 output increased by 3.6% nicely beat expectations at 2.3% and earlier 1.3% (revised down from 1.9%). (Scott Grannis).
- Employment gains were strong measured by payrolls. ADP and official reports, using alternative methods, are both important to those who want a strong justification.
- ADP private employment increased 275K. (E 170K and P 151K revised up from 129K). (ADP). Remember those who were aiming for last month's figures until they found a subset of small businesses where there was a decrease of 8,000 jobs? I guess they couldn't find one this month.
- Payroll jobs increased 263K. (E 200K and P 189K). James Picerno gives an early recording with reactions from some important economists.
My own quick task was that it was not as good as it worked, but my own concerns related to household investigation.
New Deal Democrat, not even late, identifies leading indicators of decline or recession.
My FATRADER colleague, Eric Basmajian, prefers to use a second derived approach, which measures the rate of deceleration. He also highlights important sectors that show weakness, especially in auto-production.
At the same time, the headline number and the low vacancy dominated the headlines for regular news shows. It was also great for political spins. There is nothing unusual about it, except that the participants have changed pages!
The Poor [ISM] Production Index, the only PMI that has a long history, fell to 52.8, lacks expectations of 55.0 and last month is 55.3. Read the official ISM page for some color, including border delays with Mexico and vendors moving out of China to avoid tariffs. ISM data suggests that a reading of 52.8, "if annual, equates to a 2.9% increase in real GDP."
- The FOMC rate decision was exactly in line with expectations. A word or two in Chairman Powell's press conference led to a negative market reaction. Top Fed analyst Tim Duy explains how The Fed muddled its inflation message . Here's the reaction (via Daily Shot).
- Construction expenditure reached with -0.9% worse than expected gain of 0.1% and February (down-adjusted) gain of 0.7%.
- Hotel occupancy decreased on an annual basis. That's down -1.4%. Another alleged Easter effect? (Estimated risk).
- Rail traffic went down on an annual basis. (Steven Hansen, GEI).
- Initial unemployed claims remain somewhat of the levels a month ago. 230K was the same as last week, suggesting that the "Easter time" explanation was not correct.
- ISM non-production declined to 55.5 from last month's 56.1 and lack of expectations of 57.4. ISM's official website provides details and colors. They say that "The latest relationship between NMI® and the overall economy indicates that NMI® for April (55.5 per cent) corresponds to a 2.4 per cent increase in real gross domestic product (GDP) on an annual basis."
- Employment is reflected by the household survey was very different from the payroll report. The BLS reported an unemployment rate of only 3.6%, which was the newspaper headline. Unemployment declined by 387,000, but the workforce fell by 490,000. Business cycle expert Bob Dieli rated the household report on "F." The WSJ chart (see the whole article for a lot more) shows the impact of first-time workers.
<img src = "https://static.seekingalpha.com/uploads/2019/5/4/55431-1557025365000327.png" alt = "A close-up of a map Description automatically generated  The Ugly  There are so many incidents of meaningless violence, we also have massive natural disasters, such as the typhoon in India, and anyone who is not affected should be grateful and helpful to those who were.
The week ahead
We all want to know The next best thing is to plan what to look for and how to respond
After last week's data entry, this week's calendar is easy, Inflation data will get attention, especially given Discussion that the Fed is considering alternative measures I am interested in the JOLTS report as insight into the structure of the labor market, but most use this only to measure employment growth.
Briefing.com has a good US financial calendar for the week. Amore The Japanese releases.
Next week's theme
Last week calendar included key reports and gave us a much easier form this week. While revenue reports continue, we have the key trends in mind. Fresh data has PPI and CPI. As these are expected to increase more than last week's PCE measures, there may be talk of a Fed swap to an alternative measure.
I have not seen a good synthesis of what we learned in fragmented methods of financial media. We should ask:
Should investors fear a peak?
Last week I gave a guidance for data interpretation. It wasn't as much fun as the Buffett Bingo card for today's meeting, but should have more payout for readers. Keep in mind that we proposed a baseline of real GDP growth of 2 – 2.5%, enough to support earnings and a steady stock increase. The key questions are below, with the result in italics.
- The FOMC meeting is very unlikely to reflect a change in policy, so be aware if it does. I do not consider modest changes in today's policy to be very important, but the market reacts aggressively in such cases. Here's a cheat plate based on recent FedSpeak. [ There was no policy change. Almost all Fed members have weighed in on the recruitment report. The Fed is "patient" and on hold .]
- Personal income and (March) and expenses (February) are key elements of the economic picture. We are still catching up from the closure. Income is particularly important . [Personal spending was high while income had only a slight gain. Since spending drives the GDP benchmark, it meets our test, but ultimately income gains are required.]
- PCE price index. Core rate is Fed favorite, so it's more important than other inflation indicators. If it stays low, the Fed will remain on hold. [This was good news.]
- The ISM production index is important as an almost simultaneous reading in an important sector. It has some leading qualities for employment. ISM non-production covers a wider range of businesses, but has a shorter history. The historical relationships are a key to any influence on the general economic strength. Beware of dramatic reactions to a small change. [As expected, the result drifted lower. Despite this “bad” news, the data are consistent with our benchmark suggestion.]
- Employment is a fundamental element in measuring economic strength. We require this information so much that we are often uncritical about the data. I'm just as interested in the ADP report and the "official" non-farm payroll report. They use different methods, and each contributes to value. [Both the payroll jobs and ADP reports were excellent. The household survey has drifted away from these results and needs further consideration. In any case, it does not suggest weak economic growth.]
- Corporate revenues should support today's economic picture, both in continued earnings strokes and prospects. [The earnings story continues to be excellent. Current earnings have a high beat rate, and forward earnings are seeing upward revisions.]
- Housing data is less interesting. The Case-Shiller prices are older and on a subset of the data. Waiting sales are interesting, but less significant than the new home sales data. Construction costs are also of minor importance. [The pending sales data were strong and construction spending weak. The mixed picture is in line with the benchmark growth suggestion.]
Does the evidence support the basic issue of 2 – 2.5% growth? It should be the question for each report – not whether it is a small change from last month. [It was a clean sweep. While some reports were lower than expectations nothing suggested a violation of our base case.]
I have some more conclusions in today's final thought.
Quant Corner and Risk Analysis
I have a rule for my investment customers. First, think about your risk. Only then should you consider possible rewards . I monitor many quantitative reports and highlight the best methods in this weekly update, with the indicator image.
Short-term and long-term technical conditions continue at the most favorable level. Our basic indicators have remained bullish throughout the December fall and decline. C-score reflects the increase in profit growth, despite a slight increase in the yield curve. I follow this closely, including by analyzing signs of possible confirmation of higher setback conditions.
Bob Dieli: Cyclical analysis via "C Score."
Brian Gilmartin: All things earnings, for the total market, as well as many individual companies. .
RecessionAlert: Strong quantitative indicators for both economic and market analysis.
Georg Vrba: Economic Indicator and Market Time Tool. The latest update of Georg's business index does not signal recession, and he has pushed back the date of possible concern indicated by his working model.
Doug Short and Jill Mislinski: Regular updating of a variety of indicators. Good charts and analysis, especially the big four indicators that are most important to the dating dating.
"Davidson" (via Todd Sullivan) explains the oil
After some time, Exxon (NYSE: XOM) started its refineries after being turned off for capacity upgrades, but other refineries have shut down for similar capacity upgrades. Net-Net is that the refining activity is unusually low for this time of year, and we see a sharp decline in petrol stocks that are usually based on summer demand.
We can only see to see when refining activity returns to normal season levels.
Insight for Traders
Check out our weekly "Stock Exchange". We combine links to important posts about trade, topics of current interest and ideas from our trading models. Last week we picked up a theme from that ointment, Yogi Berra, the future is not what it used to be. We provided some specific trading themes as well as expected expert advice. As always, we cited some good sources and discussed some recent picks from our trading models. With all the models again, there are several trading ideas and interesting contrasts with a basic approach. Felix classified the ten largest shares in S & P 500 and Oscar did the same for the most liquid ETFs. Taking this together was our regular editor, Blue Harbinger.
Insights for Investors
Investors should embrace volatility. They should join in my joy in a well-documented list of concerns. When the concerns (closure, Fed politics, trade) are addressed or even resolved, the investor looking beyond the obvious can accumulate well.
Best of the Week
If I had to recommend a single, read article for this week it would be Dr. Brett Steenbarger's Trading Psychology: How to Improve Your Trading Results . This is further enhanced in this Forbes article. As he often does, Dr. Brett discusses principles that are important to both traders and investors. Here's a key offer:
Many traders focus on their performance – their P / L – and never make changes to the process that can lead to lasting results. A great deal of commercial psychology writings emphasize the changes that traders should make – not the actual techniques that traders could employ to make those changes.
Brett presented a dynamic presentation at the NAAIM conference, which published rave reviews. His comments inspired my own ideas on how investors are concerned about the short-term consequences of a trade. The immediate dollar result is not the best criterion, despite its popularity. What is a good deal?
Chuck Carnevale continues his sector-by-sector quest for attractively valued stocks. Each post in this series provides both interesting ideas and a lesson on how to perform solid analysis. He analyzes the technology service sector, where "sound valuation is thrown out of the window." Despite this, he identifies five stocks to consider, comparing them with some of the big names. His post in the transport sector focuses on just four candidates (you will recognize them all) from airlines, air cargo, trucking, railways and other transportation.
Kirk Spano Analyzes the cross-currents in the oil and gas stores. He identifies the current sources of sales as well as the impact of Anadarko Petroleum Corp (APC) buyout offers. With a long-term trend away from petroleum stocks, it is important for investors to monitor these trends and possible further consolidation. He refers to an earlier article (which I connected at that time) discussing his "dirty dozen" choices for 2019.
Stone Fox Capital argues that the reaction of the Alphabet (GOOG) stock to the income man was exaggerated – a "crazy reaction. "Peter F. Way looks more up on Facebook (F).
Peter F. Way claims that the best car mass does not make cars. What is needed for the wheels to walk around? His unique marketing method shows a risk card for this universe.
My colleague at FATRADER, Bhavneesh Sharma, was recently ranked number 1 on SumZero's institutional stock picking platform. Last week, I mentioned the first part of his analysis of Moderna Therapeutics (MRNA). Here are part two.
Charlie Munger prefers Costco (COST) to Amazon (AMZN). (WSJ). [I’m not sure he is considering Amazon Web Services in reaching that conclusion]. And why is Amazon a Warren Buffett choice?
Or what about the # 3 off-price dealer, Burlington Stores (BURL). (Barron).
A bottom in Gilead (GILD). (John C. Ogg, 24/7 Wall St.)
Ploutos considers yield aristocrats, including YTD performance and long-term comparisons.
Rose Portfolio had a great April, with a 19.7% increase in income over April 2018. This is a completely transparent portfolio without much turnover.
It is also important to know when to sell the dividend stock. Dividend Sensei identifies three blueprints that you may want to sell. And also three that you can buy.
Gold represents a challenge for the value investor. As Lyn Alden Schwartzer writes,
The gold stocks, which mean companies like my gold or finance gold production, can potentially throw a wrench into a value investor's plan. Gold is an esoteric commodity; a substance that has ideal properties for storing wealth, but is discussed endlessly on how to appreciate it. It gives no cash flows, which throws out discounted cash flow analysis as a valuation tool. Most of this consumption is not by industry, so the immediate supply / demand balance does not dictate price, since most gold never recovered is still stored and can be sold. And yet, to appreciate the gold reserves as businesses, we must be able to determine whether gold is grossly overvalued, deeply undervalued, or somewhere in the middle. Therefore, the problem.
She uses two charts to help adjust her assignment. Here is one of them, but read the full entry for the reasoning and the second method.
Abnormal Returns always provide interesting ideas on a wide range of topics. I am a subscriber and I read it daily. Every Wednesday edition includes a post focusing on personal finance. This week, I especially praised the good post of FATTAILED, Prepaid Mortgage or Investing? Exploitation & Negative Bonds. This is a common question, and the post provides a good analysis with easy-to-understand examples. I doubt that most people think of the home loan as a negative bond. And the risk assessment critically depends on the real estate cycle.
Gil Weinreich's Seeking Alpha series (SA for FAs) is apparently aimed at financial advisers. The analysis is much wider than that. Most DIY investors will find it quite useful. This week I especially liked the post, The problem of too much money . He summarizes the analysis of Jim Sloan, who concludes that Mr. Buffett should buy back several stocks. He compares the problem with the average investor's. It's interesting and timely.
Watch out for …
Newspaper stocks. Warren Buffett says the business is "toast." Excellent data and interactive charts from the WSJ provide support. There is a big downturn even for papers that have successfully introduced payment walls, and it is even steeper for regional papers.
Bets on robotic missions. Beth Kindig takes the role of myth-buster in this discussion of autonomous vehicles. There are implications for Intel (INTC) and Tesla (TSLA) among others.
This week, I tried to emphasize the many attractive investment ideas. I urge readers to take some time with these ideas. You will never have more facts available. While markets hit new heights, the shares are much more attractive than they were in the fall. New heights are part of the process of some beef market.
Eddy Elfenbein noted the new information and updated the good results on his shopping list. He wrote:
Takeaway is clear. All the doomsayers a few months ago were overdoing the case. The economy is still growing and markets are responding.
I have a continued concern for investors who are taken in by stories designed to scare them without meaning (TM OldProf euphemism). These appear to fall into some key groups:
- Financial data that "declines" or "rolls over". No economic series remains indefinite on top. A "wave style" series is quite common. If the economy was too "juiced" after the tax cuts, it is not surprising to see it go back to trend.
- Newly developed recession experts. I am totally appalled at the Seeking Alpha Editor's Pick on a story that has been on the front page for several days – How the next setback will occur. It's a typical exercise in taking a pop economy concern – debt – and saying it will all end badly. The author has no credentials in forecasting forecasts and no evidence of causality. The leading e-mail source for market commentary has been on the same theme for six weeks. The debt is a fact. The implications are presumption. I often express concern about government debt. When I see it as a short-term threat to investors, you will hear about it. Meanwhile, beware of those who just sell something.
- Fed bashers. They are back in action. As usual, some believe the prices are too high, and others see them as too low. The nuanced argument is that the Fed missed the chance to raise prices earlier, and now it is fixed. I am totally surprised by the number of people claiming to know more than all the Fed economists. A small peer review would go a long way.
The consequence is that many intelligent investors are punished. In their professions, they are rewarded for acquiring knowledge. In the financial world they are punished, since the "knowledge" is false.
A final example from Dr. Bret's NAAIM presentation, which illustrates the wrong focus. He gave the example of a trader worried about a long-term debt issue. Disaster. And also an investor glued to the trading screen. It doesn't work either.
If you want to find long-term gains without guessing short-term timing, reach out to us. We have a good program for reliable and less risky revenue revenue. Send an email to main at newarc dot com. We provide some useful free information, and at your option, a non-portfolio consultation.
And also some long-term items on my radar
I am more concerned about:
- The ongoing pull from the trade policy. This happens so slowly that it's hard to see. Meanwhile, headline data has eased internal pressure for a political change.
- Post Mueller reports policy. Necessary compromises cannot be made with such intense partisanship. The last likely victim is an infrastructure compromise – still at an early stage – that we highlighted earlier this week. Here is the actual story.
I'm less worried about
- Stock Purchases. Some of the reliable bearish clans claim that this is the only reason for the stock race. Ed Clissold looks at alternatives that show that the impact has been modest (5% since 2010), even though the option held money. HT GEI and UPFINA.
- disability insurance. Recent data show that a short-term solution bought more time to achieve solvency. (Timothy Taylor).
Notice: I am / we are long GILD. I wrote this article myself, and it expresses my own opinions. I do not receive compensation for that. I have no business relationship with a company whose stock is mentioned in this article.