Oversold Markets Rebound

June 12, 2019

06-12-2019 SPY

Last week the HCM-BuyLine Alpha came close to turning over, but like we have been saying, the markets were very oversold and poised for a sharp rebound, which did happen. With the market firmly back above the HCM-BuyLine Alpha, it gives us some room to breathe. Like we stated last week, it did not give us a sell signal, so our position was maintained. This type of market is why you must have a non-emotional system; emotions were running high with tariffs being the talk of the day. The discussion of tariffs with Mexico was short-lived, and it appears President Trump got what he wanted, which was 6000 Mexican troops to stop, or at least slowdown, the flood of illegal immigrants crossing the border.

06-12-2019 SPY 2

Back to our outlook on the markets. We see equities bottoming in the intermediate-term. Our expectation is for a zig-zag pattern to develop heading into late Q2/early Q3 with the past week’s rebound of oversold markets, reinforcing our outlook that an intermediate-term low is developing. In addition, the US Dollar is weakening, but it is moving in the right direction, breaking its 2018-2019 uptrend. Bond yields are oversold and are likely bottoming. Though they have had an impressive year so far, bonds are now overstretched. Our bond system is very robust, so we feel confident that we will be able to navigate the swings anticipated in the fixed income space.

The employment report revealed an increase of just 75,000 jobs in May, compared to a monthly average of 164,000 in 2019. Gains were reported in professional and business services and health care. Little change was noted in construction, mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government. Hourly wages increased by $0.06 to $27.83, bringing the average increase in hourly earnings over the past year to 3.1%. The March and April figures were revised downward by a total of 75,000 jobs.

  • According to the U.S. Census Bureau "Monthly U.S. International Trade in Goods and Services" report, the deficit fell $1.1 billion from March to April, to $50.8 billion.
  • Exports were $206.8 billion, while imports were $257.6 billion.
  • The April deficit reflected a decrease in the goods deficit of $1 billion, and an increase in the services deficit of $0.1 billion.
  • Year-to-date, the goods and services deficit rose $4.1 billion, or 2%, from the same period in April 2018.

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