April 17, 2019

After years of flirting, the yield curve finally inverted. For the next decade, the U.S. government can borrow at a lower interest rate than it can for the next three months. The bears have been quick to point out the 10-year to 3-month yield curve’s track record for predicting recessions and market performance. The emphasis for the past two years has been on the near-inversion of the 10-year to 2-year yield curve. This portion of the curve has not inverted and is still in the sweet spot where the S&P 500 Index has risen at a rate of 10.6% per year. Naturally, the bears have ignored that inconsistency.

04-17-2019 SPY

The NAHB/Wells Fargo Housing Market Index (HMI) rose one point in April, up in three of the past four months, to 63, matching the consensus. While the index is off its cycle high of 74 reached in December 2017, it is comfortably in expansion territory and the pickup this year is a positive for the Spring home buying season. The latest increase was led by more traffic of prospective buyers. Builder confidence gained in three of the four regions, falling slightly only in the South.

  • The Weekly Retail Chain Store Sales Index rose 2.0% last week and was up 3.3% from a year ago, exceeding its 52-week average for the first time this year as sales growth accelerated with the approach of the Easter holiday.
  • Similarly, Redbook chain-store same-store sales rose 0.7% month-to-date in April, inching closer to the target of a 1.1% gain for the full month.
  • Sales were up 5.0% y/y and are expected to post 5.4% y/y by the end of this month.
  • Redbook noted brisk sales in seasonal categories, such as Easter toys and accessories, candy, apparel, and footwear.

This week’s HCM Optimized Trend Indicator (OTI) stock of the week is bluebird bio, Inc. (BLUE).
Yahoo Finance says “bluebird bio, Inc., a clinical-stage biotechnology company, focuses on developing transformative gene therapies for severe genetic diseases and cancer. Its product candidates in severe genetic diseases include LentiGlobin, which is in various clinical studies for the treatment of transfusion-dependent ß-thalassemia and severe sickle cell disease; and Lenti-D that is in Phase II/III clinical trials for the treatment of cerebral adrenoleukodystrophy, a rare hereditary neurological disorder.” As you can see from the chart below, the OTI has done what we think is a fantastic job with this stock. The buy signal back in late 2014 around $40/share would have seen some very good gains for OTI users. The buy signal in late 2016, as well as the most recent sell signal in April 2018 were also very important for people trying to capture gains and protect them when things turn South. The most recent signal was a buy in February, so hopefully today’s drop is a minor readjustment. However, if it turns out to be something more, the OTI will be watching. Way to go OTI!


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