“To date, 48% of the companies in the S&P 500 have
reported actual results for Q3. Companies are outperforming recent averages on
the earnings side and performing in line with recent averages on the revenue
side.” Story at…
My cmt: While bad sales from a couple of the FANG stocks
(Amazon & Google {Alphabet}) dominated the news last week, as noted by
FACTSET, the overall numbers are pretty good.
PERSONAL SPENDING / PCE PRICES (Reuters)
“U.S. consumer spending rose for a seventh straight month
in September, but income recorded its smallest gain in more than a year on
moderate wage growth, suggesting the current pace of spending was unlikely to
be sustained…Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, increased 0.4 percent last month…Prices continued to rise
steadily in September. The personal consumption expenditures (PCE) price index
excluding the volatile food and energy components rose 0.2 percent after being
flat in August.” Story at…
The core PCE index increase was 2% year-over-year. That’s
the inflation measure that is used by the FED and 2% is their target.
CONFIRMED MARKET TREND BREAKDOWN (Real Investment Advice)
“There is a very good chance that the sell-off will
continue until U.S. stock indices hit their support zones at the early-2018
lows [2580], then they will bounce for a time, and attempt to break below their
support zones. If and when the indices eventually close below their support
zones, that would give yet another bearish signal that would likely foreshadow
a decline to their 2015 highs [2130] (not that the bear market will stop there,
but it’s the next step after a break below the early-2018 lows).” Commentary
at…
My cmt: The charts are pretty clear that strong support
is around 2580. That’s the line in the
sand. A break there means real trouble ahead.
CORRECTION, NOT CRASH (Financial Sense)
“As we showed yesterday, the long-term MACD is close to
making a bearish crossover and could signal an important shift in the market's
trend and momentum. However, leading economic indicators and financial stress
measures are not at levels consistent with a major market peak à la 2000
or 2007, which argues that we are witnessing a normal correction in the context
of what is very likely a late-stage bull market.” – Cris Sheridan. Commentary
at…
20% RALLY COMING (MarketWatch)
“Minerd, chief investment officer for Guggenheim and one
of the world’s preeminent bond-fund managers, on Friday said that the recent
rout has left the market relatively cheap, compared with its previous lofty
levels, and that has created potential for stocks to surge higher in the next
few weeks and months: “Stocks are cheap based on forward multiples and should
rally by 15%-20%...” Story at…
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“We look for a short-term trading bottom this week given
the oversold nature of the equity markets. The ideal pattern would be for a
sharp throwback rally that fails, leading to new short-term lows around the
mid-November energy peak that should mark a major low with stocks trading
higher into next year. While I abandoned trading positions on the October 2
“sell signal,” I have not disturbed long-term investment positions, believing
we remain in a secular bull market that has years left to run. As our pal Leon
Tuey (retired technical analyst extraordinaire) wrote last week: Great news!
The market is grossly oversold and the sentiment indicators are giving super
bullish readings (excessive pessimism).” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 0.7% to 2641.
-VIX was up about 2% to 24.70. (Again, given the drop in
the S&P 500, this is a low number. The options Boys think this might be
over.)
-The yield on the 10-year Treasury rose slightly to 3.082%
as of 4:46 pm. (Looks like the Bond Ghouls might think the correction is over too.)
Friday, we noticed some improved internals, positive
action at the close and a positive closing tick (sum of final trades of the
day) of +325 and commented that the Smart Money is starting to buy. While the
S&P 500 was down again Monday, it’s about what I expected and the news wasn’t all
bad. We saw a retest of the recent low of last week and volume was lower with
some improved internals. Like Friday, today there was late-day buying and a
positive closing tick (last trades of the day) of +152. In addition, based on
last week’s commentary here in the NTSM blog, a bottom on Monday was not
unexpected. I think we are here, finally, at least in the short-term.
A short-term rally should begin tomorrow (Tuesday) –
perhaps after some early fireworks to the down side. The coming rally should
carry us back to the 200-dMA or possibly up to the 100-dMA (about a 50%
retracement). From there the most likely course would be a drop followed by a
retest of the low. The rules are changing as computers are making the decisions
on Wall Street and it is not clear that we “sheep” will be able to keep up. Still,
a 50% retracement is probably about the best we can hope for.
Support is 2580, another 3.4% below today’s close. If I
am wrong, a drop to 2580 would be likely this week, then followed by a turn-around.
Today, my daily sum of 17 Indicators improved from -4 to -2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from -51 to -45.
Today is trading day 27 for this pullback. The drop is
now 9.9% (9.9% max). Over the last 10-years, for drops less than 10%, the
average time from top to bottom has been 32-days to a final bottom, including a
retest. (The low is usually at the retest.) Except for major crashes, the
average correction was about 12% and lasted 53 trading-days including retests.
Just looking at prior corrections, it could be a month
before we see a retest of today’s low, assuming we have a retest. It is possible that the market will go straight
up from here, but it’s not likely this time
since the worries that caused the pullback are still hanging over the market.
So far, we have not had a successful test; without a
successful test of the prior low, we can’t call an end to this retreat. Today
was not a successful test.
MOMENTUM ANALYSIS:
(Momentum analysis is not useful in a selloff. As an
example, Proctor and Gamble was 16th last week – now because of a
flight to safety - it is #2. If the
downturn ends, it will drop quickly again.)
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained Neutral. (Advancing volume is still up over the last smoothed 10-day
value and new-high/new-low data improved.)
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).
I am now 50% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio. As a retiree, this is a position with which
I am comfortable unless I am in full defense mode or feeling especially
optimistic.
INTERMEDIATE / LONG-TERM INDICATOR - SELL
Monday, the Price
indicator was positive; Sentiment was neutral; Volume and VIX indicators were
negative. Overall this is a NEGATIVE indication. I am not selling yet. I think a turn-around will start soon.
