DURABLE GOODS ORDERS (Reuters)
“New orders for key U.S.-made capital goods were
unexpectedly unchanged in October and shipments rebounded modestly, which could
temper expectations of an acceleration in business spending on equipment early
in the fourth quarter.” Story at…
My cmt: Overall orders fell but that drop included
aircraft orders and CNBC reported a drop of more than 4% overall. The core value was unchanged.
JOBLESS CLAIMS (MarketWatch)
“The number of Americans who applied for unemployment
benefits in the week before Thanksgiving rose to the highest level in 4½
months, potentially adding to fresh worries about the U.S. economy. Initial
jobless claims, a rough way to measure layoffs, rose by 3,000 to 224,000 in the
seven days ended Nov. 17.” Story at…
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. increased 0.1 percent in October to 112.1 (2016 = 100), following a
0.6 percent increase in September, and a 0.5 percent increase in August. “The
US LEI increased slightly in October, and the pace of improvement slowed for
the first time since May,” said Ataman Ozyildirim, Director of Economic
Research and Global Research Chair at The Conference Board. “The index
still points to robust economic growth in early 2019, but the rapid pace of
growth may already have peaked. While near term economic growth should remain
strong, longer term growth is likely to moderate to about 2.5 percent by mid to
late 2019.” Press release at…
MICHIGAN SENTIMENT (MarketWatch)
“Most Americans are still optimistic about the U.S.
economy, but a recent slide in the stock market has made wealthier household
more anxious about their incomes, a survey of consumers shows. The University
of Michigan’s consumer-sentiment index
fell to 97.5 in November…” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.3% to 2650.
-VIX dropped about 7% to 20.8.
-The yield on the 10-year Treasury was unchanged at 3.064%.
Correction Update:
One item worth mentioning today was the huge turn-around
in the spread between new-highs and new-lows. The last time we saw this size positive
jump in spread (on a standard deviation basis) was the day before the bottom in
the 10% correction that started this past January. It doesn’t always occur in corrections (actually
less than half the time) but it may presage a bottom soon. (I included a few more
interesting stats in yesterday’s blog so go there to prevent boredom.)
Today is trading day 44 for this pullback (counting from
the top). The drop from the top is now 9.6% (9.9% max so far). These numbers
are based on closing data. 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 usually occurs at the retest.) Except for major crashes, the
average correction was about 12% and lasted 53 trading-days including retests.
The most likely course remains that there will be another
retest of the correction low, possibly after a short bounce up. We’ll have to
see what happens if and when the S&P 500 tests around the 2641 low again. I
would like to see some confirmation of a bottom soon – with luck, we may get
it.
MOMENTUM ANALYSIS:
(Momentum analysis is not useful in a selloff.)
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 remained
Negative 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).
I am now 30% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio.
Given that the S&P 500 has dropped below its
trendline (going back 2-1/2 years) and closed below the 200-dMA on consecutive
days, I have a defensive stance now. If
we have a successful test of the prior low, and that could happen soon, I’ll be
right back in. On the other hand, since
we don’t really know where the bottom is, I am taking the conservative route.
This move may result in underperforming the S&P 500, but there is a risk
that declines may be more than we expect resulting in even bigger losses.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the
Price indicator was positive; the Sentiment indicator was neutral; the Volume
and VIX indicators were negative. Overall this is a NEGATIVE indication. This
would be a Sell indication, but it’s probably too late to sell now. The first
(and important) sell signal of this corrective cycle by this indicator was on
11 October.)
