xxx
I am changing the graphics in the way I present my
analysis. In the past I have shown the
long-term model output with a BUY SELL or HOLD graphic. Recently, the outputs have been at odds with
my positions. I have gotten very
conservative while my long-term model was indicating Hold and jumped back in
while the model indicated HOLD or SELL. This is due to improvements in my short-term
modeling, but it is confusing. Therefore, in the future I will discuss the
model, but I am going to show long-term %-invested in stocks with new graphics
rather than presenting what the long-term model is showing.
xxx
“I expect the S&P 500 to lose approximately
two-thirds of its value over the completion of this cycle. My impression is
that future generations will look back on this moment and say ‘... and this is
where they completely lost their minds.’” – John Hussman, PhD.
BEAR MARKET IN 2019 (Financial Sense)
“Historically, momentum peaks up to a year ahead of
final price action. So, yes, we are entering that final phase of the bull
market. We think it's going to make selection that much more important, but we
do think the bull market is still intact.” In short, if the market's momentum
peaked this year, we should expect the final price high to occur roughly a year
later in 2019.” Ari Wald, Oppenheimer. Commentary at…
TOP MAY BE IN FOR THIS YEAR – MORGAN STANLEY (CNBC)
Stocks could struggle for the rest of the year to break
above January's record levels as volatility picks up and sentiment dwindles,
according to a top strategist from Morgan Stanley. "With volatility moving
higher we think it will be difficult for institutional clients to gross up to
or beyond the January peaks," Mike Wilson, the bank's chief U.S. equity
strategist, wrote in a note Monday [19 March]. Story at…
RISK OF INSTITUTIONAL CAPITULATION (Zerohedge)
“JPM had noted that no matter what retail investors
did, institutions
appeared to have no interest in re-entering the market, on the
contrary, they appeared to be quietly
liquidating to retail investors…According to the JPM
strategist "the biggest near-term risk for equity markets is a breach
of the lows we saw on Thursday, Feb 8th" and adds
that "anecdotally, during that Thursday, fundamental equity investors
came close to capitulation, so revisiting these lows raises the risk of
capitulation, in our view, and thus of a more serious correction
beyond the 10% decline seen between January 26th and February 8th."
– JP Morgan. Commentary at…
Not everyone is negative…
BUY THE DIPS (CNBC)
"We're trying to get our clients to buy on these
pullbacks," Scott Wren, senior global equity strategist at Wells Fargo,
told CNBC's "Futures Now"
recently. "We think this thing still has some upside the rest of the
year." – Wells Fargo. Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was UP about 2.7% to 2659.
-VIX was DOWN about 15% to 21.03.
-The yield on the 10-year Treasury was up some to 2.855%.
We saw a huge rise in Price today, but I can’t call a buy
yet. 85% of volume was up today. That’s
a strong number, but not enough on a one-day basis to signal a buy. Another
strong up-volume day and I’ll be there. Breadth was strong, too - 77% of stocks
advanced on the NYSE – but again, that’s not enough to signal a reversal. Bottom
line: We’ll have to wait another day.
Monday was a statistically-significant up-day. That just
means that the price-volume move up exceeded statistical parameters that I
track. The stats show that about 60% of the time a statistically significant
move up will be followed by a down-day the next day. This is a warning that the
move today could be a fake-out. There are still issues.
SENTIMENT
One big problem is Sentiment. I measure Sentiment as %-Bulls
(Bulls/{bulls+bears}) based on the amounts invested in Rydex/Guggenheim mutual
funds. It was 87%-Bulls Friday, and it needs to be in the 60’s or maybe low
70’s before I’d look for a correction bottom.
If this were a true crash (with prices down 50%) sentiment would be in
the 20s or 30s in terms of %-bulls. Sentiment is suggesting that this
correction may have a lot further to go before we see a bottom. If we do see a
quick recovery (i.e., the Index continues up from here), it is not likely to be
durable and we may fall back into correction later.
Here are a few technical issues:
-My daily sum of 17 Indicators dropped from -5 to -11 and
the 10-day smoothed version fell from -15 to -26. Negative totals for
indicators are bearish and the smoothed trend is down.
Let’s see what happens tomorrow.
MOMENTUM ANALYSIS IS NOW NEARLY WORTHLESS. As one can see
below in both momentum charts, most of the issues I track are now in negative
territory, i.e., few have any upward momentum. That’s just an indication that
the market is in correction mode and most stocks have been headed down.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Negative 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).
CURRENT PERCENTAGE IN STOCKS
21 March, I cut
stock holdings from 50% to 35% with the remainder in a mix of stocks and
(mostly short-term) bonds. (A comparable TSP allocation would be 35% in the
S&P 500 Index fund (C-Fund) with the remainder 65% G-Fund (Government
securities). Previously, I had reduced holdings on 31 Jan.
Monday, the VIX and
Volume indicators were negative; Price and Sentiment were neutral. This
isn’t a great time to get defensive. Indicators can signal a sell at the bottom
of a smaller correction. If I wasn’t already out, I’d probably wait.
Hopefully, we’ll have a better idea soon.
