“U.S. filings for unemployment benefits fell last week to
the lowest since September, returning to hover near an almost five-decade low
and signaling the labor market remains tight after what some economists saw as
possible cooling signs.
Jobless claims dropped to 206,000 in the week ended Dec.
8…” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was essentially unchanged at 2651.
-VIX dipped about 4% to 20.65.
-The yield on the 10-year Treasury slipped to 2.909% as
of 4:33pm.
My daily sum of 17 Indicators dropped from +2 to -8 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations dropped from +10 to +1. These are not good numbers. While I think the
correction ended at the 2633 retest on 7 December, it is not a done deal yet. The news continues to weigh on the markets with
what seems to be a near constant barrage of negative news, mostly having to do
with Trump, one way or another. The
principle issues are tariffs and now his legal troubles, but one could add a
few more without much trouble.
BULLISH SIGNS
-Up volume continues to pick up.
-Breadth vs the S&P 500 index indicates that the breadth
on the NYSE is improving faster that the S&P 500 Index.
-Breadth is now “oversold”.
NEUTRAL SIGNS
-Late day action (the Smart Money) is flat.
-VIX is neutral, but it has improved a lot. Its longer-term
curve is flat suggesting investors haven’t made up their minds. We see evidence
of investor confusion during recent sessions with big advances that fail to
hold and higher than normal unchanged volume.
-Bollinger Bands and RSI are not giving a signal.
-New-high/new-low data had been headed higher and it has
stalled.
BEAR SIGNS
-Breadth (measured as the % of NYSE stocks advancing over
the past 10-days) is falling and only 41.7% indicating that less than half of
all stocks on the NYSE have been advancing over the last 10-days. (This is also
a bull sign since this indicator (Overbought/ Oversold Index) is now oversold.)
-XLI (the cyclical industrial ETF) is underperforming the
S&P 500 and the XLU (Utilities ETF) is outperforming the S&P 500. Both are signs that investors are concerned.
-Money Trend is falling.
IN SUMMARY: Confusion reigns.
Technically, I think we ended the correction 7 Dec; but
will most investors agree? We’ll have to wait and see.
I remain bullish, but I am taking a cautious view again.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to 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 increased stock allocations to 60% invested in stocks
on 27 November. For me, fully invested is a balanced 50% stock portfolio so
this is slightly higher. I will cut back to 50% depending on indicators.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the VIX, Volume,
Price and Sentiment indicators were neutral. Overall this is a NEUTRAL
indication. Note that the VIX indicator improved to Neutral on 7 Dec. That’s a good sign for the Bulls.
