“…bond investors have several options to help protect
themselves. One is to move into floating rate bonds that have interest rates
adjusted upward every time the Fed increases its rates. Another option is to
look at a short-term laddered bond portfolio. Puplava is also using active bond
fund managers for his clients and advises against holding long-dated bonds at
this point.” Commentary at…
…and while we’re at it, where is the stock market going?
3000 OR 1500? (Real Investment Advice)
“On Monday the market broke back through the 50-dma and
retested the top of the downtrend line which coincides with the 75-dma.
Importantly, the short-term “buy signal” is threatening to reverse
which could provide further selling pressure if it occurs. This breakdown on
Monday has not yet completely broken the “bullish case” for the market
yet, however, a failed rally from current levels will bring “Option
3” into focus.” – Lance Roberts. Commentary at…
My cmt: “Option 3” is a breakdown leading to more
selling.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was UP about 0.15% to 2717.
-VIX was Down about 4% to 18.2.
-The yield on the 10-year Treasury rose to 2.893%.
My sum of 17 Indicators dropped from -3 to -9 and the
10-day smoothed version fell too (from +16 to +7). That’s not encouraging.
Late-day action was down today but, over the longer term
it remained neutral. According to market lore, Pros trade late in the day. This
indicator is built loosely on one developed by Don Hayes, except that I ignore
the opening action and concentrate only on late-day action.
The S&P 500 broke the 50-dMA and my lower trend line
yesterday and made only a weak move up today. If the trend was up (and one is
never sure with so many reversals happening during a correction) it now appears
down.
I measure Breadth as the 10-dMA of the % of stocks moving
up on the NYSE. We want to see it above 50% since it validates the up-trend. Today, Breadth dropped to 49%, indicating
that over the last 10-days less than half of the stocks on the NYSE have advanced.
This stat led my overall Market
Internals indicator to register a negative rating on the market.
Perhaps most troubling, Sentiment (%-Bulls in selected
Bull-Bear Rydex Funds) was 88.2% yesterday. (Data isn’t available until later
tonight.) That is not far below the values seen during the dot.com bubble on a
standard deviation basis. Sentiment is giving
a value that is beginning to warn of a top, not a bottom.
As far as the correction goes here are some stats:
-Today was trading-day 37, measured from the top. The
average is 32-days for <10% corrections and 68-days for corrections >10%,
ignoring major crashes.)
-The S&P 500 is 5.4% below its all-time high.
-The Index is 4.8% from the recent 8 Feb bottom.
The charts don’t look great either since Monday’s drop
broke the 50-dMA and the lower trend line on a closing basis. Today marked a
second close below those levels and that suggests a trend change down.
All of this is evidence that the Index is more likely to
retest the prior low of 2558 last seen on 8 Feb. That is a key support point
but, there is no guarantee the correction would end there. Given today’s action
I plan to cut some stock investments on Wednesday unless there is a strong
bounce up (or a huge down-day) Wednesday. All-in-all, I think a 40% investment
in stocks (or less) is appropriate. This is a conservative move given that
risks appear higher than rewards at this time.
If the Index was able to climb back above 2770 it would
make us more constructive on a quicker, and more positive, resolution of the
correction.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
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)
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
slipped to 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).
LONG TERM INDICATOR
Tuesday, the VIX
indicator was negative; Price, Sentiment and Volume were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
27 February, I
increased stock holdings from 40% to 50% with the remainder in a mix of stocks
and (mostly short-term) bonds. (A comparable TSP allocation would be 50% in the
S&P 500 Index fund (C-Fund) with the remainder 50% G-Fund (Government
securities). This is a conservative retiree position.
