"Son, if you think the
stock market is going up, be bullish. If you think it is going down, be
bearish. But for gosh sakes, make a 'call', because there are too many people
in this business that talk out of both sides of their mouths so that, no matter
what the market does, they can say, 'See, I told you that was going to happen.'
And, if you make 'calls', you are going to be wrong. The real trick for a
successful investor, or trader, is to be wrong quickly for a de minimis loss of
capital." – Jeffrey Saut.
STOCK MARKET OVERREACTING (MarketWatch)
“A volatile stock market, spurred by mixed signals on
trade, has stoked fears that the U.S. economy will take a sharp downturn in
2019. The recent tumult has prompted many investors and economists to raise the
prospect of a coming recession. But those fears are overblown, and the stock
market is overreacting.” Story at…
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“Of note is that the Advance – Decline Line remains near
new highs…and that the real yield curve (3-month T’bills to the 30-year T’bond)
is at levels that historically have been a “buy point” for stocks (Chart 3,
page 3). The SPX has now had four tests of the October 29 low…which we deemed
to be THE low, and our models continue to favor the upside. Commentary at…
My cmt: You should probably read the commentary in its
entirety. Mr. Saut is somewhat less optimistic that the above snippet would suggest.
FROM A TRADER BOARD
“Bullish stuff - Long tailed positive reversal candle
with volume climaxing.
Divergent histograms, EMAs and Stochastic...Time to consider longs again.” - Sharpshorts.
Divergent histograms, EMAs and Stochastic...Time to consider longs again.” - Sharpshorts.
My cmt: I haven’t got a clue what that means, but I agree
with the sentiment. (Actually, Sharpshorts is refering to pattern analysis
of daily moves; it’s just not something I have studied.)
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.2% to 2638.
-VIX dipped about 3% to 22.64.
-The yield on the 10-year Treasury slipped to 2.850% as
of 7:46pm.
Today was one of those inexplicable days where the
decliners outpaced advancers by a 2 to 1 ratio; declining volume was more than
twice advancing volume; and the new-high minus new-low spread was a scary -549...and the S&P 500 went up.
What the bleep? I can’t explain it other than to say investors wanted the quality
of large-cap stocks so they shunned small-caps.
If this is going to be a rally start, more stocks will need to get involved.
Friday, the 150-dMA of breadth (Advancers-Decliners) turned
negative. This is a bearish concern
since it indicates the long-term trend is currently down. It doesn’t predict
the future though. In 2015 the 150-day Advance-Decline line turned negative 2
days before the end of the 12% pullback in August, so we can hope that that
scenario will be followed this time.
Friday the 50-day moving average (50-dMA) fell below the
200-dMA. That’s the so-called “Death
Cross”. In the same correction I mentioned above (12% down in Aug 2015), the
Death Cross occurred 3-days after the bottom. The Death Cross signal stayed negative
for several months and after the market had recovered it heralded another correction
that bottomed in Feb 2016. The Death Cross signal just tells us that conditions
have been bad a while. I didn’t need a scarily
named signal to figure that out!
One could argue that the correction didn’t end on 23 Nov
at S&P 2632.56. It ended this past Friday at S&P 2633.08 on the retest.
OK, I’ll accept that. If the Friday retest was successful (and we don’t see any
lower lows in the near future) then this correction lasted 54 days. Since the average correction has lasted 53
days (over the last 10-years excluding major crashes) we are right on time for
a correction end. Of course, it is still too early to declare this correction
over with any certainty. My call remains though – the low of this correction is
2633 or there about.
The caveat, as always, is that some piece of breaking
news could upset the apple cart. We could always get Trumped (bad pun). We’ll
have to wait and see. For the time being, I am sticking with the technical
analysis that strongly suggests “correction over”.
My daily sum of 17 Indicators slipped from -1 to -2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations rose from -9 to -2.
I remain cautiously bullish.
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Neutral 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
Monday, the VIX,
Volume, Price and Sentiment indicators were neutral. Overall this is a NEUTRAL
indication. Note that the VIX indicator has turned Neutral. That’s a good sign for the Bulls.
