“U.S. homebuilding increased more than expected in March
amid a rebound in the construction of multi-family housing units,
but weakness in the single-family segment suggested the housing market
was slowing.” Story at…
INDUSTRIAL PRODUCTION (MarketWatch)
“Industrial production in March rose 0.5%, the Federal Reserve reported Tuesday…The U.S.
manufacturing sector remains in healthy shape, although there is concern over
possible trade barriers is causing factory owners to pull back.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was Up about 1.1% to 2706.
-VIX was Down about 8% to 15.25.
-The yield on the 10-year Treasury was little changed at
2.829%.
-My daily sum of 17 Indicators slipped from +4 to +1; the
10-day smoothed version remained unchanged at +30.
Correction Update:
Today was trading-day 56 since the prior top. The S&P
500 was 5.8% below the top and was 4.3% above the prior correction bottom. On average, corrections >10% have lasted
68-days…Corrections <10% have lasted 32-days. The S&P 500 is 4% above
its 200-dMA (day moving average).
The Index broke above its 50-dMA and its 100-dMA and
stalled at upper trend-line, so there’s another trendline the Index needs to
break. So far, it seems to be picking up
momentum so I think this up-trend will continue.
The long-term indicator switched from “Neutral” to a “Buy”
signal today, but only if we include the VIX indicator. I have been ignoring
the VIX indicator because VIX bottomed below 10 last summer and my previous
experience has shown that the VIX indicator can give false signals from such
low levels as it rises. That, however,
is on the Sell side and here we see a Buy signal from the Volume indicator along
with the rapidly falling VIX adding up to a Buy signal.
Given the sharp drop on the VIX and improvement on my Volume
indicator (a variant of on-balance volume) I think it is time to Buy. Recognize
that we didn’t get the hoped for strong signal at the bottom so this too could
be a fake out – there’s no guarantee the Options Boys know what they’re doing. In
addition, there are a lot of negative signs.
Bear signs follow: The short-term Market Internals indicator
dropped to neutral today because advancing volume is looking shaky; unchanged
volume was high today (126,000,000 shares) and that can be a sign of investor
confusion suggesting a possible change in direction; Smart Money
(late-day-action) is falling on a 10-day basis; the advance-decline ratio is
overbought (but not a great indicator); the Index is getting ahead of its
internals; Bollinger Bands are almost signaling overbought; Cyclical
Industrials are weak compared to the S&P 500.
There are Positive signs: Money Trend is headed up; (This
indicator attempts to follow the general concept of Lowry Research and
their supply and demand methodology for stock market analysis. Their concept is
based on a detailed stock-by-stock analysis while mine is an estimate based on
readily available Macro data. Theirs is
much more accurate, but that doesn’t mean mine isn’t useful.) New-High/New-low
data still looks OK, but the longer-term version of the Indicator is beginning
to roll over; RSI is not close to a top and this suggests the rally can
continue.
There is still a reasonable
chance the S&P 500 will retest the 8 Feb low, but given the Buy signal, my
35% stock allocation is too low, so I will move back to 50% invested in stocks
on Wednesday. This is still a conservative level of investment. I think investors
need to be conservative now since this Bull market probably doesn’t have that
much longer to go.
What would make me think twice about moving in Wednesday? A really big
up-day (>1% on high volume) or a really big down-day would put me on hold
for a bit longer.
MOMENTUM ANALYSIS IS STILL QUESTIONABLE BUT IT SHOULD
IMPROVE. 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)
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. (On 5 Apr 2018 I
corrected a coding/graphing error that has consistently shown Nike
incorrectly.)
*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 dropped
to 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).
INTERMEDIATE / LONG-TERM INDICATOR
I am planning to
increase stock investments to 50% -stocks on Wednesday.
Intermediate/Long-Term
Indicator: Tuesday, the Volume and VIX indicators turned positive; Price
and Sentiment indicators were neutral. Overall this is a BUY indication as
discussed above under Correction Update.
