Major Trend Index
MTI: Confidence Builds As S&P Flirts With High
The Attitudinal-category reading has moved to a six-month extreme as the S&P 500 flirts with its January high; improvement in the Economic work continues to reflect the pullback in various commodity measures.
MTI: Economic Measures Improve
The 30-point gain in the economic category was driven by a continued pullback in inflation measures. It’s possible that some of this reflects the chilling effects of escalating trade tensions. If that’s true, it’s the only positive side effect we can think of, and it won’t last long.
Negative MTI Suggests Rally At Risk
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MTI: Momentum Strengthens
A large gain in the Momentum category was almost entirely the result of a positive flip in a key market Reversal Model which had been bearish since March. While the long-term record of this model is good, its BUY signals over a forward three-to-six-month horizon have been less reliably bullish than, say, a breadth or momentum “thrust.”
MTI: Sentiment Continues To Build
Sentiment toward stocks continues to heat up. Our S&P 500 Liquidity Premium shows that speculation in individual stocks is picking up relative to ETF trading, a negative sign. In addition, activity in stock index options shows the “smart money” rebuilding a bearish position.
MTI Reflects High-Risk Stock Market
EPS gains, driven by the corporate tax cut, have led to improvement in several of our valuation measures, but the scope of these gains is small relative to the U.S. market’s degree of overvaluation.
MTI: Inflation Measures Retreat
Our 52-week diffusion index on a 70-commodity basket now registers essentially neutral, while all of the non-energy commodity price sub-models have improved.
MTI Remains Negative; Stay Defensive
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MTI: Market Not As Healthy Under The Surface
We’d concede that neither the relative strength of Small Caps nor the divergently strong action of the NYSE Daily Advance/Decline Line fit the pattern of a stock market undergoing a late-cycle period of distribution, however, the relatively low percentage of NYSE issues now trading above their 30-week moving averages (45.5%) suggests the market may not be as internally healthy as popularly portrayed.
MTI Suggests Risks Still Elevated
After several weeks of muted movements, three MTI categories saw swings of more than 60 points. The Supply/Demand category’s loss was the biggest move, and mostly reflected commercial hedgers’ sudden unwinding of a big net-long position in stock index futures. Such action causes this important “smart money” indicator to be more in line with the DJIA’s Smart Money Flow Index, which continues to act badly.
MTI: Market Behavior Remains Disjointed
Performance discontinuities across some of the major indexes are striking. For example, while the NASDAQ Composite is up 12% YTD, the NYSE Composite is down 1%, despite those strong A/D readings for the latter index. Today’s action leaves a similar gap between the Russell 2000 (up 10% YTD) and the DJIA (unchanged).
MTI: Big Attitudinal Drop
The decline in the attitudinal work was fairly broad based, with a few indicators even moving back to maximum negative readings.
MTI Now Decisively Negative
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MTI: Sentiment Measures Decline
A sharp loss in the Attitudinal category reflects declines in all major groupings of sentiment measures, ranging from investor opinion surveys, to fund flows, to option trading activity.
MTI: Supply/Demand Measures Deteriorate
Supply/Demand work experienced the week’s largest category loss and reflects declines in the Smart Money Flow Index (which tracks opening and closing action in the DJIA) and in our Institutional Accumulation measure, which compares up and down volume to prevailing price action.
MTI: Daily A/D Numbers Suggest Strength
The daily advance/decline numbers suggest the recent bounce has been broad, but analyses based on the 52-week highs and lows (including various versions of the “High/Low Logic Index”) are flashing warning signals similar to the ones seen in the fall of 2007 and summer of 2015.
MTI: Stock Rally Propelled Optimism
Last week’s rally succeeded in driving up one of our shortest-term measures of investor optimism, while corporate tax cuts have helped generate the highest readings in the 33-year history of our earnings “breadth” work.
MTI: Momentum Down Despite Market’s Weekly Gain
An important momentum sub-model, which considers relationships among rates-of-change for the major indexes, slipped to neutral after having been bullish since the spring of 2016. And while this model is whipsaw-prone, it’s generally on the right side of significant market breakouts or breakdowns.
MTI Remained Negative During April
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MTI: Economic Measures Improve Slightly
While we’ve emphasized several negative developments within the MTI’s Economic composite in recent months, not all of the evidence leans bearish. Outside of the oil patch, commodities have struggled to make a clear breakout, possibly reflecting the short-term bounce in the dollar.
MTI: Continued Decline In Economic/Interest Rates/Inflation Category
Earnings-related measures have remained healthy, but the more heavily-weighted components related to monetary and interest rate trends continue to migrate towards the negative side of the ledger.
MTI: Monetary And Liquidity Work Deteriorates
While we’ve always emphasized the importance of the “weight of the evidence” over the individual MTI factor categories, it’s worth highlighting some key differences between the 2018 correction (which saw a loss in the S&P 500 of 10.2% at the February 8th closing low) and the 2015-2016 S&P 500 correction of 14.2%.
MTI: Momentum Remains Surprisingly Solid
It’s mystifying that the Momentum work has not deteriorated further during the course of this correction. Despite the -9.3% S&P 500 loss through Friday’s close, the net category reading remains at a moderately bullish level.
MTI Turned Negative In March
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MTI: Second Week In Negative Zone
Based on data for the week ended March 30th, the Major Trend Index recorded a second consecutive reading in negative territory.
MTI: Major Declines In Supply/Demand & Momentum
The Supply/Demand work plummeted last week with three unrelated “smart money” measures all showing an institutional urgency to sell into the market weakness. Such behavior is atypical of this generally “countertrend” crowd, and a decisively bearish sign.
MTI: Momentum, Economic Categories Deteriorate
We’ve always emphasized the “weight of the evidence” rather than individual MTI category developments, but we have to concede we’re troubled by the steady deterioration in the two categories that propped up the MTI during the bull’s rally off the February 2016 lows: Momentum and Economic.
MTI: Momentum Rebounds
The Momentum category rebounded 49 points last week, reflecting small gains across most of the quantitative chart scores…
MTI Weakens Within Neutral Zone
The week-over-week decline was the result of big losses in Supply/Demand and Momentum/Breadth/Divergence categories. The Attitudinal category also lost ground.
MTI Weakens Within Neutral Zone
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MTI: Attitudinal Strengthens Further
Subjectively, we sense that investor sentiment has rebounded (too?) rapidly following the stock market’s air pocket earlier this month. Statistically, though, we’ve found that many of our sentiment measures perform better when the observations are smoothed using various moving average lengths.
MTI: Momentum & Attitudinal Improve
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MTI: Attitudinal and Supply/Demand Gains Prevent Greater Slide
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MTI Slides To Neutral In Early February
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MTI: Economic & Attitudinal Deterioration
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MTI: Interest Rates/Inflation Not Having Adverse Effect
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MTI: Stock Market In Melt-Up Mode
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MTI: Momentum Surges
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MTI Slipped In December, But Still Bullish
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MTI: Major Breadth Measures At New Highs
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