"You will continue to suffer if you have an
emotional reaction to everything that is said to you. True power is sitting
back and observing things with logic. True power is restraint. If words control
you that means everyone else can control you. Breathe and allow things to
pass." -Warren Buffett
PPI (WSJ)
“A gauge of U.S. business prices showed signs of bouncing
back in September after a slowdown over the summer. The producer-price index, a
measure of the prices businesses receive for their goods and services,
increased a seasonally adjusted 0.2% in September from a month earlier… Excluding
food, energy and trade, prices rose 2.9% on the year in September after
gradually moving upward this year.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell about 3.3% to 2880. (I
think we can thank the Wall Street computers for the big drop.)
-VIX jumped up about 44% to 22.96.
-The yield on the 10-year Treasury slipped to 3.161%.
Currently, my daily sum of 17 Indicators remained
unchanged at -3 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations actually improved
from -47 to -43 indicating that conditions are worse than 2-weeks ago. (This is
a surprise given the big down day today.)
Here’s a run-down of some of the indicators.
BULLISH SIGNS
-The smoothed version of Up-volume was actually up today.
I’m not sure if even I believe that one!
-Breadth (measured as the % of NYSE stocks advancing over
the past 10-days) is now only 40.3% indicating that less than half of all
stocks on the NYSE have been advancing over the last 10-days. (That is bad; but
it may be so bad it’s good.) This is a very low number often seen at
bottoms. For example, the 2011
correction low of the 19% correction had 10 and 20-day values of breadth higher
than we see today.
-Bollinger Bands and RSI are both way to the Bull side.
-New-high/new-low data is another example of too much of
a bad thing. The short-term values will be bullish if the numbers turn up. So
far, they’re just bad.
-The overbought/oversold ratio is oversold.
NEUTRAL SIGNS
-Breadth vs the S&P 500 index is neutral, but it is
leaning to the low side indicating that the Index has not fallen enough to
catch up to most stocks on the NYSE. Conversely, we might instead say that Breadth
needs to improve before the Index can go higher.
-The S&P 500 move today triggered is the kind of move
seen at bottoms; unfortunately, the same indicator can also be interpreted as a
panic indicator, signaling more to come.
I have this in “Neutral Signs” because so far, we don’t’ know which was
to interpret this indicator.
BEAR SIGNS
-Breadth (measured as the % of NYSE stocks advancing over
the past 10-days) is falling and is now only 40.3% indicating that less than
half of all stocks on the NYSE have been advancing over the last 10-days. This can
be bearish or bullish depending on trend. I put this in the Bull category above
because the numbers are so bad they’re good.
-Size of the down-moves have been larger than the up
moves over the last month.
-Late day action (the Smart Money) continues down.
-VIX is bearish.
-Money Trend is falling.
-Wednesday was a High-volume, down-day because more than
90% of the volume was down volume.
-The S&P 500 broke the 50-dMA and the 100-dMA. The NYSE Composite is 3.3% BELOW the 200-dMA.
I’ve said that we’ll probably drop below 2875 before this
pullback ends, but I didn’t think we’d drop thru it and keep going. Now we’re left with the 200-dMA as support. The
S&P 500 index now sits 0.7% above the 200-dMA with the 200-dMA at 2766. As
I write this, futures are 2763.
I am still fully invested. Whether I remain that way will
depend on the next day or two. The S&P 500 has fallen 4.9% from its high. If
it falls below 5% my long-term indicator will be signaling “Sell”. We need to
see some signs that this pullback is near an end, soon. A bit below the 200-dMA
is the line in the sand, given other indicators.
If I had to guess, I think we are close to a bottom.
MOMENTUM ANALYSIS:
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to Neutral on the market - go figure.
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
Wednesday, the Sentiment
and Price indicators were neutral; Volume & VIX indicators were negative.
Overall this is a NEUTRAL indication, but only because I have a limiter that
doesn’t signal “sell” until the Index has dropped 5%. Ignoring the 5% rule, long-term
Indicators are now negative.
