Stocks on September 15, 2018: outlook


*These are my discretionary thoughts on the market. My Medium-Long Term model determines my trades. Go to the homepage for my latest market outlook.
The economy and stock market move in the same direction in the medium-long term. Hence, leading economic indicators are also leading indicators for the stock market.

Thoughts

  1. Latest tweet
  2. Freight Transportation Services Index is trending higher. A medium-long term bullish sign for the stock market.
  3. Inflation-adjusted Retail Sales are still trending higher. A medium-long term bullish sign for the stock market and economy.
  4. Initial Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
  5. Continued Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
  6. Commercial hedgers (smart money) are insanely bullish on silver

1 am: Latest tweet


1 am: Freight Transportation Services Index is trending higher. A medium-long term bullish sign for the stock market.
The Freight Transportation Services Index measures the volume of the movement of freight in the U.S. This indicator tends to flatten or fall before an equities bear market or economic recession begins.

The latest reading for the Freight Transportation Services Index fell a little. However, the key point is that this is still trending higher. This suggests that the bull market in U.S. stocks will continue.

1 am: Inflation-adjusted Retail Sales are still trending higher. A medium-long term bullish sign for the stock market and economy.
Yesterday’s reading for Retail Sales fell a little. However, the key point is that inflation-adjusted Retail Sales are still trending higher.

This is a medium-long term bullish sign for the stock market because inflation-adjusted Retail Sales typically trend sideways before an equities bear market or economic recession begins.
This chart demonstrates the positive correlation between the S&P 500 and Retail Sales.

1 am: Initial Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
Yesterday’s reading for Initial Claims made a new low for this economic expansion (fell from 205k to 204k).  The key point is that Initial Claims are still trending lower right now.

*Initial Claims lead the economy and stock market. Historically, its trends higher before a bear market in stocks started (see study).

We use Initial Claims data in these 2 trading models (here and here). These 2 trading models state that you should be long stocks right now because Initial Claims data is still trending downwards.
This suggests that the bull market in stocks is not over because Initial Claims have not trended higher yet. HOWEVER, we are watching out for any SUSTAINED increase in this data series because Initial Claims are very low right now (historically speaking). We are trying to catch the bull market’s top because the bull market most likely only has 1-2 years left.

Flipping the Initial Claims axis makes the inverse relationship between Initial Claims & the S&P very clear.

1 am: Continued Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
Yesterday’s reading for Continued Claims made a new low for this economic expansion. But the key point is that Continued Claims are still trending lower right now.

Like Initial Claims, Continued Claims lead the stock market and economy.
This suggests that the bull market in stocks is not over because Continued Claims have not trended higher yet. HOWEVER, we are watching out for any SUSTAINED increase in this data series because Continued Claims are very low right now (historically speaking). We are trying to catch the bull market’s top because the bull market most likely only has 1-2 years left.

This chart demonstrates the inverse correlation between the S&P 500 and Continued Claims. A downwards trending Continued Claims = medium-long term bullish for the stock market.

Flipping the Continued Claims axis makes the inverse relationship between Continued Claims & the S&P very clear.

1 am: Commercial hedgers (smart money) are insanely bullish on silver
Commercial hedgers right now are the most bullish they’ve been on silver since mid-2015.

Read Stocks on September 12, 2018: outlook

Outlook

Here’s what I think will happen based on my discretionary outlook.

  1. The S&P 500 has approximately 1 year left in this bull market (bull market top sometime in 2019).
  2. I will scale out of my long positions throughout 2019 (see why)

I am 67% long SSO right now (2x S&P 500 ETF) because my Medium-Long Term model does not foresee a big correction or bear market at this point in time. (This is a step down from being 100% long SSO previously). I ignore small corrections. I only sidestep big corrections and bear markets.
I have been long the S&P 500 since September 7, 2017 when it was at 2465.
*I also have a small Day Trading portfolio. Click here to view my day trades.

2 comments add yours

  1. Hi Troy,
    Did you see short term risk between now and end of 2018 that led you to sell 1/3 of your long position?
    Thanks,
    Frank

    • Hi Frank,
      I didn’t sell 1/3 of my position. I got some new cash, and I didn’t use all of the new cash to go long.

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