ISM MANUFACTURING (CNBC)
“U.S. manufacturing activity expanded at a
slower-than-expected pace last month and reached its lowest level in more than
two years, according to data released Friday. The ISM Manufacturing Index
slipped to 54.2 in February…” Story at…
PERSONAL INCOME/SPENDING (Reuters)
“U.S. personal income fell for the first time in more
than three years in January and consumer spending dropped by the most since
2009 in December, putting the economy on a weak growth path early in the first
quarter.” Story at…
CORE PCE (FxStreet)
“…core PCE, the Fed's preferred gauge of inflation, rose
0.2% and 1.9% on a monthly and yearly basis.” Story at…
MICHIGAN SENTIMENT (forexlive)
“The Uni. of Michigan consumer sentiment for February
(final) came in weaker than expected of 93.8 versus 95.9 estimate.
The preliminary reading came in at 95.5…the reading this one sits near the
middle of the four-year range. So sentiment remains relatively elevated
but lower than expectations.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.7% to 2803.
-VIX dropped about 8% to 13.57.
-The yield on the 10-year Treasury rose to 2.758%
The Index did manage to crack above the 2800 level today,
but it didn’t break above the 8 November intermediate high of 2807. Otherwise,
not much change from yesterday. Today looked like a reflexive rally after three
down-days and the dip-buyers moved in. Apparently, 3 flat-days counts as a dip?
Regardless, it is not unusual to see a series of up and down moves at a top and
I think we are at or very near a top.
Today was a statistically significant up-day. Statistics
show that a statistically significant up-day is followed by a down day about
60% of the time. In addition, tops almost always occur at statistically-significant
up-days, but not all statistically significant up-days are tops.
Yesterday’s blog had a rundown of indicators. We saw little change today. New-high/new-low data flipped to bullish; RSI
was a bearish 81. For more details see my prior blog.
Overall, my daily sum of 20 Indicators improved from +2
to +5 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from +70 to +72.
This is a now a mildly bullish to neutral indication. (Some late-data updates improved
yesterday’s numbers a bit.)
Levels of resistance on the way up are now points of
support. The Index is 2% above the
200-dMA and 6.1% above the 50-dMA. Some of the Elliott Wave folks are
suggesting a drop well below the December low.
As I have often repeated:
There hasn’t been a 15%+ correction in the last 50-years
that didn’t retest the prior lows.
A full retest of the Christmas Eve low seems unlikely
now, but it could still happen. Given
the length of time since the December low (more than 2 months) a drop to within
a couple of percent of the prior low would be close enough to be considered a
retest of the low and that’s a decent probability.
Only a retest at or near 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; numbers
this week were not much better. 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…
FRIDAY 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).
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, the VIX and
PRICE indicators were positive. The VOLUME and SENTIMENT indicators were
neutral. Overall this is a POSITIVE/BULLISH indication. I remain defensive,
expecting some sort of pullback.
