“U.S. job growth surged in January, with employers hiring
the most workers in 11 months, pointing to underlying strength in the economy
despite an uncertain outlook that has left the Federal Reserve wary about more
interest rate hikes this year…Nonfarm payrolls jumped by 304,000 jobs last
month, the largest gain since February 2018..” Story at…
ISM MANUFACTURING (MarketWatch)
“American manufacturers say business picked up in the
first month of 2019 after moderating sharply in December. The Institute for Supply Management said its
manufacturing index rebounded in January to 56.6% from 54.3% in the prior
month.” Story at…
CONSUMER SENTIMENT (Bloomberg)
“The University of Michigan’s final January sentiment
index fell to a two-year low of 91.2…Confidence remains relatively elevated
compared with historical levels, though it's at the lowest since President
Donald Trump was elected.” Story at…
CONSTRUCTION SPENDING (MiamiHerald)
“U.S. construction spending edged up in November as a
gain in home building helped offset weakness in nonresidential construction. The
Commerce Department said Friday that construction spending rose 0.8 percent in
November after a 0.1 percent gain in October and a 1.8 percent fall in
September.” Story at…
CORRECTION UPDATE
This is day 91 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 7.7% (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%.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.1% to 2707.
-VIX fell about 3% to 16.14.
-The yield on the 10-year Treasury rose to 2.678%.
My daily sum of 17 Indicators slipped from +12 to +11 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +62 to +63.
While it appears that the Index has broken its downtrend
line, there are still resistance points that may prove problematic for further
advance. Thursday the Index climbed to the 100-dMA, but Friday it was not able
to climb above it. The way the markets
have been acting one wonders whether it will just blast above the 100-day next
week. Perhaps, but I am seeing some signs of slowdown in the advance.
In the last month there have been only 5 down-days and in
recent years that has been a bearish sign. Up-volume and Money Trend look like
they are reversing to the down side. The
overbought/oversold ratio is overbought. The late-day action indicator is also
overbought – it has been too bullish for too long. New-highs have increased,
but the increase now puts it at a level where correction-bounces have failed in
the past. None of this is definitive, but making this kind of short-term call
is more witchcraft than analysis.
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…
FRIDAY 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
Friday, Volume and
Price indicators were positive. The VIX and Sentiment indicators were neutral.
Overall this is a BULLISH indication.
