INDICATOR INSIGHTS
Monthly Update - Sept 2024
CATEGORY
Market Sentiment/Risk MO. END % CHANGE LEVEL
Fear & Greed Index (Market sentiment) 63 + 9 Greed
VIX (S&P 500 Volatility measure) 15 - 1.1 Low - steady
MMRI (Risk measured by interest rates) 247 - 11 Mid - high risk
U.S. 10yr-bond yield 3.91 - .07 Slight decrease
Fear & Greed Bitcoin 29 - 23 Fear
CSI (Consumer Sentiment) Up slightly 0.1 Slight increase
U.S. Economy UP/DOWN LEVEL
LEI (Overall leading indicators) Down Bearish
CPI (Consumer Price Index) Up Bearish
(Minus Food & Energy) Up Bearish
ISM/PMI (Producers Manufacturing Index) Down Bearish
JOLTS (Unemployment categories) Up Bearish
ADP (Jobs – non-farm payroll added) Down Bearish *See below
(Initial and continued claims) Up Bearish
Transports (Shipping, durable goods orders) Up slightly Bullish *See below
Real Estate (Housing starts) Down Bearish
(Total Construction Public/Private) Down Bearish
Mortgage demand Down Bearish
Retail Spending Up Bullish ? *See below
*This section updated on August 30, 2024
**LTE = Lower than expected (bearish) / HTE = Higher than expected (bullish)
***We do not present the most recent numbers as they are often revised, and not reported in the mainstream media. Actual figures and charts can be found on the internet, including the FRED (Federal Reserve Economic Data) website.
Price Action UP/DOWN LEVEL
RSI (Relative Price Strength) Up Bullish
PCR (Put to Call Ratio – 5 day avg) Down slightly Neutral
ADL (Advance/Decline line) Up Bullish
MFI (Money Flow Index) Up slightly Slightly bullish *See below
Institutional Trading Selling Bearish
Commodities MO. END % CHANGE LEVEL
Gold to Silver Ratio 85.6 + 0.8 Slight silver bias
Crude Oil 73.65 - 2.66 Bearish
As introduced in Chapter 3 of our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology (available on Amazon), there are several “leading indicators” that go largely unnoticed and under-utilized by the average beginner or intermediate investor. Some of these indicators measure human emotion and market sentiment that often determines shorter term price action, while others uncover the true conditions of the economy, institutional buying and selling, and risk levels.
In our monthly “Indicator Insights” blog (first weekend of each month) we report the previous month-end levels (pertaining to the U.S. economy and/or the S&P 500) regarding several of these easy-to-read gauges we discuss, as well as others, to provide a quick-guide for our readers, with periodic analysis when necessary. Our monthly updates in this blog section include several market psychology related gauges, including the S&P 500 Fear & Greed index updated level, although there will be no commentary, as we dedicate an entire separate weekly blog to that indicator. Please note that we have made a few adjustments to our Indicator Insights introductory edition.
In this edition we continue to focus on the fact that most of the U.S. economic indicators we track remain bearish, indicating a likely coming recession. This trend has continued through several months, despite some “initial” reports to the contrary. The biggest revelation this month was the “revision” (a concept we often discuss) of the job creation report from 2023, announced just a couple of weeks ago. This “revision,” by the Department of Labor and Statistics, suggests that the number of jobs created last year was actually 818,000 less than originally reported. If that number is divided by 12 months, it equals over 68,000 jobs creations “over” the reported creations per month, for the last year. Once again, we always remind readers to take the information in initial reports with a grain of salt, especially long-term investors, as revisions generally go unreported by the media. The market always immediately over-reacts to initial reports, so traders need to be attentive at all times, while long-termers should at least be aware.
In addition to the ADP, other notable levels this month include Durable Goods orders and Retail Spending. The former was up slightly, however, that has been attributed to military spending (which also boosts the GDP). The latter is questionable as well, as far as positive news, as consumers are still forced to pay higher prices, therefore, are forced to spend more.
The Advance/Decline Line (ADL), continued to be a bright spot, which suggests more widespread participation in advancing stocks, rather than only the “Magnificent 7” leaders. This may fare well for the overall health of the market if it continues when bullish sentiment returns. The Money Flow Index also increased, however the recovery from a major drop leaves it around the “neutral” level.
During the Federal reserve meeting this month Fed chair Jerome Powell indicated that the “time has come” for “policy to adjust,” which was widely believed to suggest definitive rate cuts in September. He did not exactly commit to that, however, and continued to state that the decision would be “data dependent.” Additional data since then has not shown any reduction regarding inflation, so don’t hold your breath (or go all in with risk-on equities) for that rate cut at the September meeting.
Finally, as discussed last month, affordability has reached extremely low levels, and personal debt remains at all-time highs. The reported slight increases in Retail Spending (0.6%) and GDP (Gross Domestic Product) may simply be a result of the noted higher prices and military spending. More improvement in these areas regarding higher wages, lower unemployment, legitimate spending, and lower inflation would be required for bearish sentiment to change.
Although the market has been disjointed from these obvious signs, and has largely ignored the job creation revision, it is likely to catch up. Although the wild daily price swings have subsided for the most part (with a few exceptions), the market volatility will likely continue for some time. If “panic” sets in, be prepared to take advantage of lower asset prices in the future.
