ISM NON-MANUFACTURING INDEX (The Street.com)
“Activity in the U.S. services sector, by far the largest
component of the world's biggest economy, slowed notably in September, the ISM
Purchasing Managers survey indicated Thursday, falling to the lowest level in
more than three years. The headline ISM index slipped to 52.6 points last month…”
Story at…
My cmt: A number
of 50 is still indicates expansion.
JOBLESS CLAIMS (MarketWatch)
“The number of people who applied for U.S. jobless
benefits at the end of September rose to a one-month high of 219,000, partly
reflecting a three-week-old strike at General Motors that has idled tens of
thousands of workers.” Story at…
My cmt: Otherwise there was no sign of increased layoffs.
FACTORY ORDERS (MarketWatch)
“Factory orders fell 0.1% in August, the Commerce
Department said Thursday.” Story at…
No good economic news today!
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.8% to 2910.
-VIX fell about 7% to 20.56.
-The yield on the 10-year Treasury dipped to 1.536. (The
Bond Ghouls didn’t quite buy into the “pullback-over” scenario today.)
Around 10 AM this morning the S&P 500 hit 2856 and tested
the August lows. It made a brief double bottom about 5 minutes later and
bounced up from there. The close was very strong as buyers came in in the last
10 minutes of trading to put an exclamation point on the day. Overall, this was a bullish close. There are
other bull signs, too.
Utilities (XLU ) has more momentum than the S&P 500,
but the S&P 500-Utilities spread is moving in the right direction and
suggests the bottom is in. The spread between the Cyclical Industrials (XLI)
and S&P 500 is also suggesting yesterday was a bottom – the spread reached levels
seen in recent pullbacks and XLI is improving vs. the S&P 500.
We noted yesterday that the close was on the trend line
established by the 3 June low and 14 August low. Chart wise, this suggests an
end to selling.
Bollinger Bands and RSI remain oversold Thursday – a bullish
sign. (These are the 2 bottom indicators calling a bottom. I should have noted a +2 in the TOP / BOTTOM
INDICATOR SCALE below. I corrected that
today.
My daily sum of 20 Indicators improved from -12 to
-11 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from -25 to
-37. (These numbers sometimes change after I post the blog based on data that
comes in late.) A reminder: Most of these indicators are short-term. This isn’t
much of an improvement in the indicator total, still…
I am bullish now.
That is counter to all the economic news that seems to be trending down,
so I will pay close attention to the market. The market may still tell us to
get bearish.
I won’t make any drastic investment changes unless I get
a sell-signal from the long-term indicator. I may reset trading positions if Friday
is reasonably bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +2
Most Recent Day with a value other than Zero: +2 on 3
October.
(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…
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEGATIVE 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 50% invested in
stocks as of 27 Sept 2019 (down from 55%). This is a conservative balanced
position appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the VOLUME indicator is
Bearish; VIX, PRICE and SENTIMENT Indicators were neutral. Overall, the
Long-Term Indicator remained HOLD.
