EARNINGS INSIGHT (FACTSET)
“To
date, 89% of the companies in the S&P 500 have reported actual results for
Q4 2018. In terms of earnings, the percentage of companies reporting actual EPS
above estimates (69%) is below the five-year average. In aggregate, companies
are reporting earnings that are 3.5% above the estimates, which is also below
the five-year average. In terms of revenues, the percentage of companies
reporting actual revenues above estimates (61%) is slightly above the five-year
average. In aggregate, companies are reporting revenues that are 1.1% above the
estimates, which is also above the five-year average.” Analysis at…
BULLS RUNNING ON FUMES (MarketWatch)
“With the S&P 500 Index now almost striking our minimum
target of 2,800 points we set for this b-wave rally many months ago, we have to
begin tracking the potential that it’s been completed…most of the market [is]
confident that the correction is over and that we are now on our way to much
greater heights in the market. While it is certainly possible that they are
correct, I do not see that as the greater likelihood at this time.…if the
S&P 500 should break below 2,764 and follow through below 2,750, then…it
can push out this correction for many more months.” – Avi Gilbert, StockWaves
service at Elliottwavetrader.net. Story at…
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“My indicators that were looking for an energy polarity
peak have reversed with the mild stall we have seen and currently are
configured again to the upside. I did not expect that, but in this business you
take what they give you. As one of my mentors used to say, “It is no disgrace
to guess wrong, the mistake is to stay wrong!” My indicators now reflect an
upside move without much of a pullback. The pace of the rally should slow,
however, following this extraordinary December upside run.” – Jeffrey Saut.
Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.1% to 2796.
-VIX rose about 10% to 14.85. (Odd that VIX rose when the
S&P 500 was up. The Options Boys seem concerned about the rally.)
-The yield on the 10-year Treasury rose to 2.666%. (Maybe
the Bond Ghouls are concerned too.)
I think I’ll leave The Old Fool quote (above) up from now
on. It really is a key point that I occasionally forget. The point of this blog was to avoid over-thinking
the stock market. Looking back now, we can see that had I simply followed my
indicators, I would be ahead of where I am now. I may still come out ahead, though, especially
if Avi Gilbert is correct in the above piece. In the chart that accompanied his
analysis (not included in this blog) he showed an estimated completion of wave
“C” (correction bottom) at about 2170, more than 20% below today’s close.
We had the bear side of the argument made by Avi Gilbert.
Jeffrey Saut wrote the bull side of the story this morning (commentary above). As usual there is plenty of disagreement over
market direction. I should point out,
however, that Avi Gilbert’s analysis leaves room for further upside before a
drop to new lows. A significant drop is certainly what history suggests. As I’ve noted frequently, there hasn’t been a
15%+ correction in the last 50-years that didn’t retest the prior lows.
The S&P 500 rose to 2812 in the morning and faded down
the rest of the day. Today’s close was below the November high of 2807. That’s
weak on the day and Bob Pisani of CNBC noted that today’s action indicated that
a successful trade deal with China was already in the market. The failure of
the market to move much higher on Trump’s good news on trade over the weekend supports
that argument.
The Index is now 1.7% above the 200-dMA.
My daily sum of 20 Indicators remained +11 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations rose from +80 to +87. Overall, this is bullish.
(I’ve added 2 more indicators so the totals have changed.)
I’m reluctant to jump back in when markets are getting
over-bought based on Price and Breadth. I hope to identify a better entry point.
A full retest of the Christmas Eve low seems unlikely
now, but it could still happen. (A
pullback of some kind is overdue, but most indicators aren’t currently
predicting a drop.) Only a retest at the 2351 level, or a climb back above the
old highs, will tell us whether 2351 was THE bottom. Last week’s financial data
(LEI, Philly FED, Durable Orders and Jobless Claims) were weak and one wonders
whether the markets can retake old highs any time soon – it looks doubtful to
me.
MOMENTUM ANALYSIS:
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
to 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
Monday, the VIX, VOLUME
and PRICE indicators were positive. The SENTIMENT indicator was neutral.
Overall this is a POSITIVE/BULLISH indication. I remain defensive, expecting
some sort of pullback.
