June 27, 2019

06-19-2019 buyline

The HCM-BuyLine Alpha is still nicely above any change in trend, but with that said, we are mildly overbought. A modest pullback is warranted, and we do expect one. Look at the chart below of the S&P 500. You can see our outlook over the next few weeks to mid-July showing the possibility of a choppy market. The Dow Jones Industrial Average looks set for a lower open as investors wait for U.S. President Donald Trump and Chinese President Xi Jinping to meet at the G-20 gathering later this week.

06-19-2019 XCG


Let’s take a look at China with the (CQQQ) China technology ETF and see how their markets have fared in all the turmoil over the trade war. Looking at the HCM-BuyLine Alpha, we are still in a downtrend, telling us negotiations between President Trump and Prime Minster XI have not fared well. However, it does look like it could turn. Historically, you can see how well the HCM-BuyLine Alpha has caught the turns from a very nice run-up to a very dramatic drop.



Dividend payers have outperformed non-payers one year after the first Fed rate cut. The Fed has signaled that it is prepared to lower its target fed funds rate at the July 30-31 meeting for the first time since 2008. Our U.S. strategy team focused on one area that could be especially impacted by changes in Fed policy: dividend stocks.

Dividend stocks have tended to outperform around the first rate cut. The ratio of Dividend payers to non-payers has rallied in the three months before the first cut, traded off during the first four months after the cut, and rallied for another five months, on average.

  • Durable goods orders fell 1.3% in May, down in three of the past four months, and worse than the consensus of -0.3%.
  • Transportation equipment orders declined 4.6%, led by civilian aircraft still reflecting the grounding of the Boeing 737 MAX jet.
  • Excluding transportation, orders were up 0.3%.
  • Nondefense capital goods orders ex-aircraft, or core business orders, rebounded 0.4%, partially reversing the 1.0% drop in the prior month.
  • Individual core categories were mixed.

On a y/y trend basis, durable goods orders declined 0.9%, down for the first time since January 2017. Core goods orders rose 2.1% y/y, but that was the slowest pace also since early 2017. Additionally, the core book-to-bill ratio slipped to 99.0%, near its lowest level since June 2016, and below 100% for the fifth month in a row. Inventories rose 0.5%, while unfilled orders dropped by 0.5%. All these indicators suggest reduced capex demand and slower factory activity.

This week’s HCM Optimized Trend Indicator (OTI) stock of the week is Qudian Inc. (QD). Yahoo Finance says, “Qudian Inc. provides online small consumer credit products in the People's Republic of China. It uses big data-enabled technologies, including artificial intelligence and machine learning to transform the consumer finance experience. The company offers small credit products, such as cash credit products; merchandise credit products to finance borrowers' direct purchase of merchandise offered on its marketplace on installment basis; and budget auto financing products. In addition, it operates a platform for loan recommendations and referrals.” As you can see from the chart below this stock has not had many signals, four to be exact, but we think this makes it easy to see the effect of the OTI. Of the first three signals, the two most important ones are the sell signals. With both sell signals occurring while QD was trading over $10/share, OTI users were able to miss the long, steady decline of this stock. At the end of 2018, QD was trading around $4/share, and a buy signal was recommended. Today, the stock is trading at roughly $8/share, nearly doubling its price from the buy signal. Way to go OTI!


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