“Investors got a stark reminder of how fast their bets
can turn in China, where the most bullish trades are falling apart. The
country’s currency was their latest favorite to succumb to a rout that has
roiled financial markets around the world this week, losing as much as 1.2
percent on Thursday for the biggest decline since the aftermath of its 2015
shock devaluation. That follows a selloff in large caps and banks that has wiped out about $660 billion from the value of
Chinese equities.” Story at…
SENTIMENT
I’ve been watching my sentiment indicator, the 5-dMA of
%-Bulls. On a day-to-day basis Sentiment
has been dropping slightly,
but on a 5-day basis, there’s not much difference from the start of the
correction. The 5-dMA of %-Bulls was 91%-Bulls 3-days ago. Thursday the value
was 89% - still at extreme levels. This is a sign that today’s jump higher is
not likely to be the end of the correction.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 1.5% to 2620.
-VIX was down about 13% to 29.06.
-The yield on the 10-year Treasury rose to 2.856%.
My sum of 17 Indicators was unchanged at -8 today. (A “-”
number means that most indicators are bearish.) Smoothed versions of this
indicator (designed to avoid the daily fluctuation) show that the sum of
indicators remains sharply bearish.
Today’s overall volume was the 2nd highest of
any of the days in the downturn so far. Since it was on an up-day, it is a
somewhat bullish sign. I say “somewhat,”
because up-volume was not high enough to suggest the down-trend has stopped. This
looks like a bounce to me. A bounce to around 2650 is possible.
The S&P 500 dropped to its 200-dMA (2539) around 1:30
Friday and popped up from there. We
don’t yet know if the test will hold. As
I’ve noted before, we need to see volume drop as the Index falls. While it’s
clear that we had some reflexive buying today, it is not at all clear that
selling pressure has been reduced much. The
“average” of 8-corrections since 2009 (excluding the 2009 crash) has lasted
about 50-trading days and bottomed with a 12% loss, top to bottom. The shortest
was 20-trading days long; the longest was 108. Friday was day 11 of this
correction; the Index is down 8.8% as of today.
Bottom line: It still looks like we’ve got a way to go,
but, there is a possibility this could be the “V” bottom that the Bulls dream
about. As for me, I‘ll bet on history.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
In corrections this
chart may be less valuable – all stocks are falling.
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the 4-months
from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed
the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked in the top 3
Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.)
XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
In corrections
this chart may be less valuable – all stocks are falling.
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained Neutral on the market.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2014, using these
internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive,
out on Negative – no shorting).
LONG TERM INDICATOR
Friday,
Sentiment, Volume and VIX Indicators were negative; Price remained neutral. My
system is designed to call tops and bottoms, but I don’t know how far the
market may fall once we have a sell-signal. While the model currently says
sell; that may not be the best move since we are already down 10%.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I shifted to a
conservative 40% invested in stocks and 60% in cash on 31 Jan. For the TSP,
that would be 40% in the S&P 500 Index fund (C-Fund) with the remainder 60%
G-Fund (Government securities) on 31 Jan.
