Stocks Fall on China News … Volatility to Increase … Time to Raise Cash? … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

STOCKS FALL ON CHINA NEWS (CNCBC)

“Stocks fell to their lows of the day on Friday on news that Chinese trade officials are cutting short their visit to the U.S. The Dow Jones Industrial Average traded 100 points lower while the S&P 500 fell 0.4%.” Story at…

https://www.cnbc.com/2019/09/20/stock-market-wall-street-in-focus-as-us-china-trade-talks-resume.html

 

VOLATILITY TO INCREASE (CNBC)

"For investors taking a breather from the chaos in August, buckle up as the market is about to go crazy again, Goldman Sachs warned…stock volatility has been 25% higher in October on average since 1928, according to Goldman.” Story at…

https://www.cnbc.com/2019/09/20/goldman-sachs-says-the-market-is-about-to-get-wild-in-october.html

 

TIME TO RAISE CASH? (MarketWatch)

“In these factious times, investors are hard put to find their footing. They face rising uncertainty but falling returns. By some measures, uncertainty about economic prospects is currently highest on record. Further, policy makers seem to have limited ammunition to reflate economies…When faced with uncertainties, it is advisable to have optionality,” the CEO of Singapore’s GIC Pte was quoted as saying by Bloomberg on Thursday. “Tactically, that may be raising some cash as dry powder." Story at...

https://www.marketwatch.com/story/why-one-of-the-worlds-top-investors-says-now-may-be-the-time-to-raise-cash-2019-09-19?mod=mw_theo_homepage

 

MARKET REPORT / ANALYSIS         

-Friday the S&P 500 dipped about 0.5% to 2992.

-VIX rose about 10% to 15.41.

-The yield on the 10-year Treasury slipped to 1.723.

 

While the S&P 500 topped out 6 days ago, the Index is only down 0.6%, not sign of a correction so far. Indicators are mostly benign. We’ve seen RSI (14-day, SMA) signal overbought, but it is now 71 a neutral indication. There are no top-indicators giving bearish signals and more than half of all issues on the NYSE have been up over the last 2-week. So, at this point, we can’t say that a pullback is imminent. New-highs are continuing to fall, so concerns remain. Smart Money is bearish too.

 

If a correction does begin, the 50-dMa is 2950.  That’s an important point if we are to avoid a correction. The 100-dMA is about 2918; that was the S&P 500 high in 2018.  That’s about where we might expect a pullback to end if we do get a downturn.

 

My daily sum of 20 Indicators remained +1 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations slipped from +73 to +71. (These numbers sometimes change after I post the blog based on data that comes in late.)

 

Today was a high-volume day with a rebalancing of the S&P 500.  Perhaps market participants have been waiting for the rebalance. We don’t know, we’ll have to wait on the markets. In the meantime, I remain bullish.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: 0      

- Most Recent Day with a value other than Zero: -1 on 18 September.

(1) +10 Max Bullish / -10 Max Bearish)

(2) -4 or below is a Sell sign. +4 or better is a Buy Sign.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

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).

 

Using the Short-term indicator in 2018 in SPY would have made a 5% gain instead of a 6% loss for buy-and-hold. The methodology was Buy on a POSITIVE indication and Sell on a NEGATIVE indication and stay out until the next POSITIVE indication. The back-test included 13-buys and 13-sells, or a trade every 2-weeks on average.  

 

My current stock allocation is about 55% invested in stocks as of 20 August 2019. This is a conservative balanced position appropriate for a retiree.

 

INTERMEDIATE / LONG-TERM INDICATOR

Friday, the VOLUME, PRICE, SENTIMENT and VIX Indicators were neutral. Overall, the Long-Term Indicator remained HOLD.