“U.S. hiring rebounded in April and the unemployment rate
dropped below 4 percent for the first time since 2000, while wage gains cooled
by more than forecast in a sign that the labor market still isn’t tight enough
to spur inflation. Payrolls rose 164,000…” Story at…
AVG HOURLY EARNNGS (Reuters)
“The Labor Department’s closely watched employment report
on Friday also showed wages barely rose last month, which could ease concerns
that inflation pressures are rapidly building up, likely keeping the Federal
Reserve on a gradual path of monetary policy tightening.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.3% to 2663.
-VIX dropped about 7% to 14.77.
-The yield on the 10-year Treasury slipped to 2.946%.
The payroll report was good today since it showed little
or no inflation pressure. The news that Warren Buffet has been buying Apple
stock (75-million shares) didn’t hurt either. The day was a strong one with up-volume
above 80%. If the next trading day
(Monday) is another day like today, we will get a lot more optimistic and
increase stock allocation.
To validate the bullish day, my daily sum of 17
Indicators popped from -8 to +1; the 10-day smoothed version remained -45. Further, the basket of Market Internals I
track jumped up to give a Positive indication for the markets. We still haven’t
had a successful retest on a closing basis.
The S&P 500 did retest its prior low on an intra-day
basis Thursday and that may have been part of the reason for the bullish mood
Friday. As I have said for some time, we need a close at or below the prior correction-low
(2581) to make a more informed call about where the correction is going. While we haven’t gotten a successful test of
the correction low on a closing basis so far, we did get a buy-signal from the
long-term indicator on 17 April. That
signal is why I am currently “Fully Invested” though I have recommended that others
may want to shade their stock allocation to the low side until we can get a
better confirmation of “correction over”.
My plan ahead remains: If the S&P 500 drops to its
prior low of 2581 and there is an unsuccessful retest, I will probably cut
stock holdings again. If we see a successful test I’ll be adding to stocks.
MOMENTUM ANALYSIS IS STILL QUESTIONABLE. As one can see
below in both momentum charts, there are still a lot of issues in negative
territory, i.e., they have weak upward momentum. That’s just an indication that
the market is in correction mode and most stocks have been headed down. Momentum
has gotten worse in the last week or so. Today, conditions were more positive.
100% of the ETFs were up – it has been a month since we saw all the ETF’s up on
a day.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
from Negative to 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).
18 Apr 2018 I
increased stock investments from 35% to 50% based on the Intermediate/Long-Term
Indicator that turned positive on the 17th. (It has since turned Neutral.) For
me, fully invested is a balanced 50% stock portfolio. This is not the time
to take extra risk, so you may want to have less invested in stocks than normal.
50% is my minimum unless I am in full defense mode.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Friday, the Volume, VIX, Price and Sentiment indicators were
neutral. Overall this is a NEUTRAL indication.
