“…while one can point to numerous factors that have
contributed to a shift in investor preferences from speculation toward
risk-aversion, it’s a fact of human nature that crowd psychology periodically
fluctuates between exuberance and despair. Knowing this, it’s essential to be
vigilant about downside risk at the point where extreme valuations are met by a
shift in investor attitudes toward risk (which we infer from the uniformity of
market internals). Our most reliable measures of those risk preferences shifted
to a negative condition in the week ended February 2nd, and they remain
unfavorable here…We’re already defensive based on offensively extreme
valuations and unfavorable market internals” – John Hussman, Phd.
Hussman Commentary, including the above chart and others,
at…
SPIN (RIA)
“For the last 30 years, each Administration, along with
the Federal Reserve, have continued to operate under Keynesian monetary and
fiscal policies believing the model works. The reality, however, has been that most of the
aggregate growth in the economy has been financed by deficit spending, credit
expansion and a reduction in savings… policies that have been
enacted previously have all failed, be it “cash for clunkers” to
“Quantitative Easing”, because each intervention either dragged future
consumption forward or stimulated asset markets. Dragging future consumption
forward leaves a “void” in the future that has to be continually filled, and
creating an artificial wealth effect decreases savings which could, and should
have been, used for productive investment.” – Lance Roberts. Commentary at…
JPM ANNUAL LETTER EXCERPT (MarketWatch)
“Financial markets have a life of their own and are
sometimes barely connected to the real economy (most people don’t pay much
attention to the financial markets, nor do the markets affect them very much).
Volatile markets and/or declining markets generally have been a reaction to the
economic environment. Most of the major downturns in the market since the Great
Depression reflect negative future expectations due to a potential or real
recession. In almost all of these cases, stock markets fell, credit losses
increased and credit spreads rose, among other disruptions. The biggest
negative effect of volatile markets is that it can create market panic, which
could start to slow the growth of the real economy. The years 1929 and 2009 are
the only real examples in the United States in the past 100 years when panic in
the markets caused large reductions in investments and hiring. I wouldn’t give
this scenario very high odds — in fact, I would give it low odds. Most people
think of those events as one-in-a-thousand-year floods. But because the
experience of 2009 is so recent, there is always a chance that people may
overreact.” Jamie Dimon, Chairman & CEO, JPM Chase. Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was Up about 0.3% to 2613.
-VIX was Up about 1% to 21.77.
-The yield on the 10-year Treasury was unchanged at 2.781%.
OMG! That is a nasty looking chart. Don Hays developed an
Indicator that uses the negative of the morning action (when emotion is high)
and the positive of the late day action (when the smart money trades) and
calculates a running total. (My Smart Money Indicator is based on this principle,
but I only look at the Smart Money – late day action.) The above chart would be
very bearish today since the morning was very bullish (the indicator bets
against the morning) and the afternoon was bearish (the indicator bets with the
afternoon). The same is true for my Smart Money indicator; it has turned down
on a longer-term (10-day) basis too.
-My daily sum of 17 Indicators remained at +3; the 10-day
smoothed version improved from -16 to -8.
Indicators are generally turning more bullish. The comparisons from
2-weeks ago (for the 10-day indicators) are more bullish now; stated another
way, conditions are more bullish than 2-weeks ago.
Correction Update:
Today was trading-day 50 since the prior top. The S&P
500 was 9.0% below the top and was 1.1% above the prior correction bottom. On average, corrections >10% have lasted
68-days…Corrections <10% have lasted 32-days. The S&P 500 is only 0.7%
above its 200-dMA (day moving average).
My guess is that we’ll bounce around for a week or two –
up or flat – who knows? After that, I still think we are due for another retest
of the 8 Feb low. Long-term, I agree with the majority - this does not look
like a major crash, but I would not be surprised to see another 5% down from
here.
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)
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Positive 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
21 March, I cut
stock holdings from 50% to 35% with the remainder in a mix of stocks and
(mostly short-term) bonds. I previously reduced stock exposure on 31 Jan.
Intermediate/Long-Term
Indicator: Monday, the VIX indicator was bullish; Volume, Price and
Sentiment indicators were neutral. Overall, the Intermediate/Long-term
Indicator remains Neutral.
