Market Indicators give divergent signals

Although denied by several media, its macro data and yield curve say so: the US economy is entering a cooling cycle, a slowdown that is not yet a recession. The last data of Retail Sales was devastating: there fell the last hope of a stable economy after the Manufacturing sector's last readings confirm its contraction of several months, while the Non-Manufacturing is in a limit of 50.

While the US and China have achieved a commercial truce, which does not eliminate the uncertainty between the two countries, the above factors probably stimulate the Fed to reduce its interest rate at its next session. Add to this fact, that the end of the stock repurchase blackout is this week (the real engine of the stock rally). All this makes Wall Street live a false illusion today, happy and carefree, hovering around its historical all-time highs. Investors and cautious traders have already become aware of this panorama and are changing their portfolios, not closing positions but being more defensive. It is clear the situation does not only affect the US, but it is global: the Trade War is passing a very high bill to the global economies.

Some private indicators are reflecting this particular situation, markets high in a pre-recession economy, and are mostly neutral at the moment, although with a bias to change trends for the medium and long term.

Three indicators, different signals

1- The popular indicator 'Fear & Greed' of CNN Money identifies the emotion that drives the market. And today it's exactly neutral, increasing its value 8% since the previous reading. It works also as a contrarian indicator, that is, excessive greed is a bearish signal. It uses seven indicators in its calculation, one of them being notorious this time: this last week the volume of puts dropped to its lowest level in two years, a sign of extreme greed by bulls investors.
Another similar, the Bull & Bear indicator from Bank of America, not shown, this week rises its value to 1.9 from 1.2, being now in the limit between Buy or Sell signal (value= 2). Usually very accurate and follow by the smart money, the message is clear: don´t buy, just hold positions.

2- The last weekly survey of the AAII American Association of Individual Investors, showed a strong migration from bears to bulls, although this is still below average. This reads as optimism for the next 6 months. As it has historically proven to be also a good contrary indicator, higher increases over the current 33.6% can be interpreted as a medium-long term bearish signal.

3. This graph of The Conference Board chart reads alone: it shows that the CEO level of confidence in the economy behavior was below the 50+ positive level, reaching its lowest value since 2008. Usually, this happens during recession months (shaded in gray). Could it be that CEOs see economic problems before individuals of the AAII?