EMPIRE STATE MANUFACTURING (MarketWatch)
“The New York Fed’s Empire State business conditions
index showed subdued conditions for manufacturing in the state for the seventh
straight month. The index inched up 0.6 point to 3.5 in December…” Story at…
My cmt: A number above zero indicates expansion.
IMPEACHMENT NOT A FAILURE (ZeroHedge)
“…in addition to public interest (news report engagement)
and public support (polls), the betting markets are also going "the
wrong way" as PredictIt shows the odds of Trump serving out his first
term are soaring back to pre-impeachment-process highs...”
Chart and commentary from…
BLOOMBERG INTELLIGENCE (Financial Sense)
“It’s possible that November marked the beginning of a
bullish upswing in stocks. Markets powered forward in November, Martin Adams
explained, and risky investments finally dominated risk-off plays…’We still
think 2020 will be an incrementally positive year, though certainly not
(comparable with) the year that we just had,” Martin Adams said. “We are
expecting a single-digit gain in stocks as implied by our fair value model. And
we do think investors want to start to orient their portfolios toward more
cyclical names, as opposed to the very highly defensive strategies that really
dominated at least the middle portion of 2019.’” - Gina Martin Adams, Chief
equity strategist at Bloomberg Intelligence. Commentary at…
https://www.financialsense.com/blog/19430/gina-martin-adams-2020-outlook-greg-weldon-dollar-weakness
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“As we move into next year, we expect volatility to
‘ascend’ from and not ‘descend’ to those historically low levels. Several
catalyst for volatility-inducing headlines include elevated expectations,
impeachment, the US presidential election, and a ‘revisiting’ of trade
tensions. Just like airline seats, modest pullback periods will feel
uncomfortable, but we view them as normal, healthy tests for equities and would
use them as buying opportunities.”
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“Going in to this week, the markets had four big issue to
deal with. The Fed, UK election, Dec 15 tariffs and impeachment. I really
thought one of the first three would have caused one of those 1-3 day shakeouts
into the usual mid-December low this or next week. That certainly hasn’t been
the case and as I have said all along, I think impeachment is a just a media
distraction and nothing to take seriously for the economy nor markets…Stocks
definitely look a little tired and I won’t be surprised if we see red arrows to
close the week. Small caps are stepping up, something I have been mentioning as
a precursor to the next leg higher.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3191.
-VIX dipped about 4% to 12.14.
-The yield on the 10-year Treasury rose to 1.878. (They’re
still selling bonds and buying stocks.)
As of today, we’ve had 47 days up with not more than a
few brief pauses; only two of those pauses had more than 2 down-days in a row.
That’s a bullish run! The “normal” selling or buying stampede lasts about 28-days
or so. It should run out about the time we hit Christmas, if it can manage to
make it that far. We still have only had 7 out of the last 10 days that were
up; and 12 of the last 20 days were up.
Neither of these stats say the market is grossly overbought. There are a
few others that do:
(1) The S&P 500 is way ahead of the advancers on the
NYSE, a measure of Breadth; (2) Bollinger Bands are overbought; (3) the S&P
500 is 8.3% above its 200-dMA and the signal is more bearish when sentiment is
considered.
None of this means that there will be much of a pullback
when it finally arrives. I expect a
buying opportunity to include a 3-5 retreat.
As we see in the above market commentaries, and others
I’ve posted recently, there’s a lot more bullishness now with commentary that
it’s time for “risk-off” in the stock market. I don’t disagree.
My daily sum of 20 Indicators dipped from +5 to +4
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations improved from -3 to +4 (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.
As I’ve written before, we’re due for a pullback, but I
think any pullback should be relatively small – say down to the 50-dMA (3068),
about 3-5% lower than current values. A drop to the 100-dMA at 3005 is not out
of the question since the 100-dMA is actually on the lower trend line, but it
seems like there is a lot of pent-up buying energy that should prevent a big
drop.
I remain bullish in the long-term; short-term it still
looks like we are in for a bit of a pullback.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
Most Recent Day with a value other than Zero: -3 on 16
December (S&P 500 vs the 200-dMA w/sentiment; Breadth vs S&P 500; Bollinger
Bands all calling for a top).
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher 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.
MONDAY 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).
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 60% invested in
stocks as of 7 Oct 2019 (up from 50%). This is a conservative balanced position
appropriate for a retiree. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE indicator was Bullish; VIX,
SENTIMENT and VOLUME Indicators were neutral. Overall, the Long-Term Indicator
remained HOLD.
