“The Federal Reserve held interest rates steady on
Wednesday but said it would be patient in lifting borrowing costs further this
year as it pointed to rising uncertainty about the U.S. economic outlook. While
the Fed said continued U.S. economic and job growth were still “the most likely
outcomes,” it removed language from its December policy statement that risks to
the outlook were “roughly balanced” and struck language that projected “some
further” rate hikes would be appropriate in 2019.” Story at…
My cmt: Markets rose on the announcement. The statement
doesn’t add much to what Powel had said in a recent speech that calmed the
markets, so I am a little surprised at the big reaction today.
ADP EMPOYMENT (MarketWatch)
“Companies in the U.S. added 213,000 jobs in
January, ADP reported Wednesday, another
strong reading that suggests little letdown in a steadily growing economy.”
Story at…
CRUDE OIL INVENTORIES (OilPrice.com)
“As international prices inched up in the aftermath of
Washington’s latest sanctions against Venezuela, the Energy Information
Administration reported a
build in crude oil inventories for the week to January 25. At 900,000 barrels,
the build is modest, and follows an increase of 8
million barrels in the previous week.” Story at…
TRUCKING STRONG BUT SLOWING (ATA)
“American Trucking Associations’ advanced seasonally
adjusted (SA) For-Hire Truck Tonnage Index increased 6.6% in all of 2018 – the
largest annual gain since 1998 (10.1%) and significantly better than the 3.8%
increase in 2017. That annual gain was realized despite a decrease of 4.3%
in December to 111.9, down from November’s level of 116.9. “The good news is
that 2018 was a banner year for truck tonnage, witnessing the largest annual
increase we’ve seen in two decades,” said ATA Chief Economist Bob
Costello. “With that said, there is evidence that the industry and economy is
moderating as tonnage fell a combined total of 5.6% in October and November
after hitting an all-time high in October.” Press release at…
OH NO…GLOBAL COOLING! (TheNewAmerican)
“The climate alarmists just can’t catch a break. NASA is
reporting that the sun is entering one of the deepest Solar Minima of the Space
Age; and Earth’s atmosphere is responding in kind. “We see a cooling trend,”
said Martin Mlynczak of NASA’s Langley Research Center. “High above Earth’s surface,
near the edge of space, our atmosphere is losing heat energy. If current trends
continue, it could soon set a Space Age record for cold…” …The new NASA
findings are in line with studies released by UC-San Diego and Northumbria University in Great Britain
last year, both of which predict a Grand Solar Minimum in coming decades due to
low sunspot activity. Both studies predicted sun activity similar to the Maunder Minimum of the
mid-17th to early 18th centuries, which coincided to a time known as the Little
Ice Age, during which temperatures were much lower than those of today.” Story
at…
My cmt: Don’t cash in your IRAs! Perhaps Democratic
Representative Alexandria Ocasio-Cortez’s prediction that the world will end in
12 years due to global warming is a bit premature.
CORRECTION UPDATE
This is day 89 of this correction (assuming we haven’t
made a bottom yet – I count top to bottom).
As of today’s close, the Index is down 8.5% (19.8% max) from its prior
high and has included 21 new-lows. In recent years only the 2011 correction
contained 21 new-lows. That correction bottomed at 19.4% and took 108-days to
complete, top to bottom.
Over the last 20-years (excluding major crashes and the
current year) there have been 2 corrections that exceeded 19%, in 1998 and
2011. In 2011, the waterfall phase (nearly straight down with little or no
bounces) took place over 3-weeks (about 15-trading sessions) and included a 17%
drop with almost no relief. In 2018, the waterfall phase that ended Christmas
Eve lasted 3-weeks over 15-trading sessions and included a drop of 16%. Looking at a longer time period we see the
following:
What happens when a correction’s waterfall decline exceeds
15%?
Chart by Bryce
Coward, CFA from…
There were 19 instances since 1946 when the decline
equaled or exceeded 15%. The ensuing bounce (col 3) averaged 12%. The entire
waterfall decline was retraced a couple times during crash events. A recession
occurred in every year except 1987,1998 and 2011. Note that the far-right
column indicates that the low was retested
every time.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 1.6% to 2681.
-VIX fell about 8% to 17.66.
-The yield on the 10-year Treasury slipped to 2.677%.
(The Bond Ghouls may have some doubts about the rally.)
While I still think a retest down to the 2351 low is
likely, there are signs that the S&P 500 wants to go higher, especially
since it has pushed above the 50-dMA. It
will be hard to sit back and watch if it does climb steadily. The “fear-of-missing-out” syndrome will be in
full force.
My daily sum of 17 Indicators improved from +8 to +12 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +50 to +56. Here’s a
run down of some of the stronger signals.
BULLISH SIGNS
-There have been a number of closes above 50-dMA since 17
January.
-As of today, the Index is now slightly above its upper downtrend
line extending back to 3 Oct 2018. A trend break is generally indicated by 2
consecutive closes above the old trend or a close 3% higher than the old trendline.
We’ll have to see if the Index can close higher tomorrow.
-Up-volume is picking up.
-Size of the up-moves have been larger than the down moves
over the last month.
-Late day action (the Smart Money) is headed up.
-New-high/new-low data is looking better and is bullish.
NEUTRAL SIGNS
-VIX is neutral.
-Bollinger Bands and RSI are not giving a signal.
-Money Trend is turning up. This is neutral at this point,
because it is a high number that may not be sustainable.
-The Utilities ETF (XLU) vs. the S&P 500 is neutral.
BEAR SIGNS
-Breadth (measured as the % of NYSE stocks advancing over
the past 10-days) is 60.4%. This is a very extreme number and as a result, the
overbought/oversold ratio remains overbought.
We said that the close at 2671 was probably a short-term
top. We got slightly higher today, but it was another Statistically-Significant
up-day as was the 2671 high. That means that the price-volume move exceeded my
statistical parameters. Stats show that
a down-day occurs in the next trading session about 60% of the time. Statistically-significant,
up-days can indicate a top, so today’s move probably indicates another
short-term top. I need to see some more bullishness before I conceded the bear
is dead.
Repeating what I’ve been saying for a while:
A “V”-bottom is very unusual and I don’t think it is
likely that this correction will race to a top without a retest of the prior
low at 2351. I sold the rally and cut my stock holdings back to about 30%, 9
January to reduce risk. Only a retest at the 2351 level, or a climb back above
the old highs (not likely without a retest), will tell us whether 2351 was THE
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained POSITIVE 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).
My current stock allocation is about 30% invested in
stocks on as of 9 January 2019. For me, fully invested is a balanced 50% stock
portfolio so this is a very conservative position.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, Volume and
Price indicators were positive. The VIX and Sentiment indicators were neutral.
Overall this is a BULLISH indication.
