HOUSING STARTS (Reuters)
“U.S. homebuilding increased more than expected in
November and permits for future home construction surged to a 12-1/2-year high
as lower mortgage rates continue to boost the housing market and support the
broader economy.” Story at…
INDUSTRIAL PRODUCTION (MarketWatch)
“Manufacturing surged 1.1% in November, led by a 12.4%
gain in production of cars and trucks and related parts. This is a rebound
following the end of the United Auto Workers strike against General Motors in
October. Excluding motor vehicles and parts, total industrial output was up
0.5%, while manufacturing was up 0.3%, the Fed said.” Story at…
JOLTS – JOB OPENINGS (MarketWatch)
“The number of job openings ticked up in October, and
more Americans quit their jobs, both signs of a strong labor market.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1pt to 3193.
-VIX dipped about 1% to 12.29.
-The yield on the 10-year Treasury rose to 1.884.
Today we saw a late-day selloff – it was not big, but it
did take-away the day’s profits. We also note that unchanged volume was very
high. Some consider this a sign of investor confusion that is typical at
turning points. I don’t know about that;
we’ve had three days that were higher in Oct and Nov without a turn in market
enthusiasm. However; it is a concern at this point since a turn-down does seem
overdue. We have other signs too.
As of today, there have been only 2 down days in the last
10. That usually indicates a pullback of some kind.
My daily sum of 20 Indicators remained +4 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed sum that
negates the daily fluctuations improved from +4 to +15 (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 (way too much it seems), we’re due
for a pullback, but I think any pullback should be relatively small – say down
to the 50-dMA (3073), about 3-5% lower than current values. A drop to the
100-dMA at 3007 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.
We also note that the Fosback New-High/New-Low Logic
Index is much closer to giving a Buy indication than a Sell indication. This is
just another sign that any selloff should be short-lived.
I remain bullish in the long-term; short-term - it’s the
broken record report - 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 17
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.
TUESDAY 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
Tuesday, the PRICE and VOLUME indicators were
Bullish; VIX and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator improved to BUY. At this point it only means that conditions
have been good recently. The long-term
indicator is designed to signal a BUY after a bottom as conditions improve.
Sometimes it can signal a buy at a Top when conditions look good. At present, I
expect a pullback so this wouldn’t be a great time to buy.
