Friday, September 2, 2016

This Week's Message: August Trends

Back on August 15th I shared the title of each collected data point in my "Current Trends, August" file. Here's the balance of the month:

  • Fund managers still fairly defensive, but less so in recent months. U.S. exposure at 20 month high, room to grow but bearish tailwind has passed. Same for Emerging Markets.
  • Weekly MACD barely rolling over. RSI okay (i.e., stock market technicals are looking suspect).
  • U.S. Corporate Debt showing strength. Denotes economic strength.
  • Performance by sector denotes strengthening economy.
  • Energy 'stocks' trend looks technically bullish.
  • Consumer staples look expensive here.
  • Biotech chart looks promising
  • Global equities less overbought.
  • Q2 earnings finish with best beat rate since 2010. Revenue beats best since 2014.
  • Earnings guidance spread finished slightly in the red.
  • Tech scored the best in terms of earnings and revenue beats in Q2.
  • Jobless claims denote strong labor market. Under 300k fro 76 straight weeks!
  • Industrial production improving.
  • CPI for services higher, thanks to healthcare.
  • Housing permits decline suggesting growth in starts is about to come to a halt. Possibly contract.
  • Housing dynamic not a demand issue, but rather a lack of land and tight labor market.
  • Jump in AAII bullish sentiment a red flag, if it keeps up.
  • Year to date performance bodes very well for balance of year, historically speaking.
  • Chicago Fed Nat'l Activity Index up again in July. Denotes economic strength and suggests a 3+% Q3 GDP print.
  • Last year's losers are this year's winners. Denotes a new trend and strengthening of current bull market.
  • Mortgage data does not support continuation of July's blowout new housing results.
  • Brazil's new president courting global investors.
  • New home sales suggest that the economic cycle is at a healthy stage.
  • Eurozone consumer sentiment and retail numbers suggest no big Brexit hangover, at this point.
  • Eurozone composite PMI shows continued expansion despite Brexit.
  • Even France's PMI signals a return to growth.
  • Britain's low rates may stimulate economy, but exacerbate the hugely underfunded pension problem.
  • Early China data show stability extending into August.
  • China environmental policy could shutter production; potentially supportive for industrial commodity prices going forward.
  • Emerging Market chart finally looking up.
  • Copper glut persists while nickel looking better.
  • Westpac Banking Corp says iron ore price will suffer going forward.
  • Contrary to popular political opinion, China is opening its sectors to foreign investors.
  • Technicals improving for financial stocks, even, a little, in Europe.
  • Yellen relatively hawkish, but no worries for huge move.
  • Yellen speech pushed up on the dollar. Longer-term technicals, however, don't support a higher dollar. 
  • Rising crude inventories bearish for pricing.
  • AAII bullish sentiment declines; which is a bullish sign going forward.
  • Recent calm has brought almost every sector out of overbought territory.
  • Consumer sentiment, non-seasonally adjusted, is unusually high for this time of year.
  • Crude price technicals looking suspect.
  • Chinese stocks look cheap.
  • UK house prices and consumer sentiment good despite Brexit.
  • The Chemical Activity Index shows real strength and speaks positively about industrial production and economic prospects going forward.
  • Truck tonnage back down to the beginning of the year level.
  • July construction spending good in key areas.
  • Auto sales, overall, disappoint. Mixed on a maker by maker bases. Sales are essentially moving sideways for now.
  • Euro corporate bond yields crater as ECB steps in.
  • Eurozone sentiment indicators show no recession worries, despite Brexit.
  • UK credit soft, but not slumping, post Brexit.
  • Canada joining China's new infrastructure investment bank (smart!)
  • China's top steel mills bearish on price going forward

Bottom line: The U.S. economy, on balance, continues to improve. Europe, at this juncture, has weathered the Brexit shock better than expected. China, in many respects, is continuing to play ball (increasingly so, actually) with the rest of the world. Oil prices should fluctuate within a fairly tight range going forward. Corporate earnings are looking up. U.S. stocks' sideways action alleviates short-term topping concerns. And there appears to remain a healthy enough degree of skepticism among investors.

August was quiet, with the S&P 500 off just a fraction on the month. With history as our guide, September ought to be more, let's say, interesting.

Have a great weekend!

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