"Orders for durable goods in November pointed to business equipment investment continued to slow in the fourth quarter. While orders rose 0.8% in November…“core capital goods” fell 0.6% in November…” Story at
GDP (FoxBusiness)
"The U.S. economy slightly
cooled its growth rate during the third quarter, with the gross domestic
product (GDP) falling to 3.4 percent in a third reading on Friday…” Story at…
PERSONAL SPENDING (Bloomberg)
"The latest data on personal spending shows that consumers
are not cutting costs, which will ensure the sector will remain the backbone of
economic growth going into 2019. Fed policy makers will watch inflation
developments very closely as the core gauge hovers around their projections for
next year.” - Yelena Shulyatyeva and Carl Riccadonna, Bloomberg
Economics. Story at…
MICHIGAN SENTIMENT (MarketWatch)
"The University of Michigan's consumer-sentiment gauge
registered a final December reading of 98.3 vs. a preliminary
reading of 97.5…"While the plunge in stock prices has recently
garnered the most attention in the national press, consumers have focused more
on their concerns about income and job prospects," said Richard Curtin, a
University of Michigan economist…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 1.6% to 2467.
-VIX rose 6% to 30.11.
-The yield on the 10-year Treasury slipped to 2.783%.
Today there was extreme volume (175% of the monthly
average) due to mostly to options expiration so any inference from the day’s
action is somewhat suspect. There was no
good news, other than to continue the mantra that every indicator I have
remains oversold.
The number that jumps out? 52-week, new-lows, were again
over 1000 with today’s number coming in at 1059. In 2015, the correction-bottom
was 1-day after the new-low number was over 1000. So maybe today or Monday will
be the low? We saw high new-low data yesterday too. The Wall St adage is “never
on Friday.” That means downturns never end on Friday. Investors will stew over the weekend and sell
on Monday; the bottom is, more often than not, on Monday. That sets up turn-around Tuesday, so we’ll
look for early next week for a turn-around under the Christmas Tree.
Now for the bad news.
We just saw back-to-back days with new-lows over 1,000. In
the past 10-years, that has only happened during the Financial Crisis and it
didn’t happen near the bottom. Let’s
hope the options expiration today played a part in this rare event.
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 slipped from -40 to -41. The
up-volume indicator switched to bullish, but that is an anomaly. As an absolute
number, up-volume was up on today’s huge overall volume. On a percentage basis,
up-volume does not look good and its chart would still be down.
This is day 64 of this correction. The Index is down 17.5% from its prior high. There
have been 20 new-lows so far. Outside of the Financial Crisis, that has not happened
in any correction over the last 10-years.
The average correction over the last 10-years (excluding
major crashes) lasted 52-days. The average drop over that period was 12%. The
longest correction in the last 10-years was the 19% drop in 2011. It took
108-days to complete, top to bottom.
MOMENTUM ANALYSIS:
(Momentum analysis is suspect in a selloff, so I‘d be
careful using momentum data for the time being – the only reason utilities are
highly ranked among ETFs is as an alternative to stocks during the correction.) The same is true for individual stocks in the
Dow 30.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
to Neutral on the market, but that is due to the up-volume anomaly I mentioned
previously so I’ll ignore it for now. I don't think Internals have improved today.
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 increased stock allocations to 60% invested in stocks
on 27 November. I bumped up stock investments to 65% on 19 December. Both
increases were made at technical bottoms or shortly thereafter. For me, fully
invested is a balanced 50% stock portfolio so this is higher. The failure of
technical bottoms has been disappointing, to say the least.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the VIX and
Volume indicators were negative; Price and Sentiment were neutral. Overall this
is a NEGATIVE / SELL indication. The concern is that the important sell-signal
was last October. The NTSM long-term system can give sell signals near a bottom
too. For the next day or two, I am ignoring this indication.
