Personal Income … Personal Spending … PCE Prices … Chicago PMI … Univ of Michigan Sentiment … Stock Market Analysis… ETF Trading … Dow 30 Ranking

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

 

PERSONAL INCOME / SPENDING (WSJ)

“Consumer spending eased at the end of last year, part of a trend of steady but slower spending gains that lead to the smallest annual increase since 2016. Personal-consumption expenditures, or household spending, rose a seasonally adjusted 0.3% in December from November, the Commerce Department said Friday. Personal income also advanced 0.2% last month.” Story at…

https://www.wsj.com/articles/u-s-consumer-spending-rose-in-december-11580477531 

 

PCE PRICES (fxstreet)

“Inflation in the United States, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose 0.3% on a monthly basis in December…On a yearly basis, the PCE Price Index came in at 1.6%...” Story at…

https://www.fxstreet.com/news/us-annual-core-pce-price-index-ticked-up-to-16-in-december-as-expected-202001311342

 

CHICAGO PMI (MarketWatch)

“Manufacturing activity in the Midwest sank in January to the lowest level since December 2015, according to a survey of businesses released Friday by MNI Indicators. The Chicago Purchasing Managers Index fell to 42.9 this month…” Story at…

https://www.marketwatch.com/story/chicago-manufacturing-activity-slumps-in-january-to-weakest-reading-since-late-2015-2020-01-31 

 

MICHIGAN SENTIMENT (CNBC)

“The University of Michigan’s consumer sentiment index came in at 99.8 for January… “The resilience of consumers is remarkable and due to record low unemployment, record gains in income and wealth, as well as near record lows in inflation and interest rates,” said Richard Curtin, Surveys of Consumers chief economist, in a statement.” Story at…

https://www.cnbc.com/2020/01/31/us-consumer-sentiment-for-january-comes-in-at-99point8-vs-99point1-estimate.html 

 

MARKET REPORT / ANALYSIS         

-Friday the S&P 500 dropped about 1.8% to 3226.

-VIX jumped about 22% to 18.84.

-The yield on the 10-year Treasury dropped to 1.509.

 

As we suspected, the World Health Organization declaration yesterday that the coronavirus is a “Public Health Emergency” didn’t exactly settle the markets, so it is not surprising that indicators were more bearish today.

 

The daily sum of 20 Indicators declined from -8 to -11 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations dropped from -27 to -45. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

The S&P 500 closed 0.4% above its 50-dMA Friday. Investors are likely to worry over the weekend and sell on Monday.  Further, most corrections include a “waterfall phase” where prices fall nearly straight down, so I doubt that we have seen the last of this dip. For smaller corrections (and we hope that is what we are seeing) the average fall from top to bottom takes about 35 trading sessions. Today was day 9.

 

Major support levels are:

-50-dMA, now at 3211

-100-dMA, now at 3110

-200-dMA, now at 3012

It is very unlikely that any retreat would be lower than the 200-dMA.

 

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 30 January (The S&P 500 was too far above its 200-dMA when sentiment is considered.)

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

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

 

MOMENTUM ANALYSIS:

During corrections momentum analysis may not be useful.

 

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)

- I cut my Apple (AAPL) position in half Monday, but I still own a large position in AAPL.

- I cut my XLK position in half Monday, but I still own a large position in XLK.

 

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.

 

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 NEGATIVE / BEARISH 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 45% invested in stocks as of 27 January (down from 60%). This is a conservative 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

Friday, the VOLUME and Panic Indicator were negative; VIX, PRICE, and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator declined to SELL. This suggests a Defensive position is appropriate, but I took a defensive position 4-trading sessions ago so there is no action to take at this point.   

 

Jobless Claims … GDP-Advance … Heritage Capital Blog Excerpt … Stock Market Analysis … ETF Trading … Dow 30 Ranking

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

 

JOBLESS CLAIMS (MarketWatch)

The number of Americans who applied for unemployment benefits in late January fell slightly and gave no hint of rising layoffs, indicating the labor market remains very robust. Initial jobless claims declined by 7,000 to 216,000 in the seven days ended Jan. 25…” Story at…

https://www.marketwatch.com/story/new-us-jobless-claim-fall-slightly-to-216000-in-late-january-2020-01-30

 

GDP-ADVANCE (NYTimes)

“Gross domestic product — which measures the value of goods and services produced inside the United States — grew at a 2.1 percent annual rate between October and December, the same as the previous three months, according to preliminary data released by the Commerce Department on Thursday…Year-over-year growth was 2.3 percent in 2019, compared with 2.5 percent a year earlier.” Story at…

https://www.nytimes.com/2020/01/30/business/economy/gdp-numbers.html

 

PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)

“…the only way to cure all this giddiness and greed is with at least a short, sharp pullback. Trading ranges rarely create enough of a scare. Over the next few months, stocks could take two paths to repair sentiment. First, the bounce since Monday’s low could peter out sooner than later with another leg down in February to clean everything up. Or, stocks could be entering a multi-week or month trading range that ultimately breaks to the downside later in Q1.” Commentary at…

http://investfortomorrowblog.com/archives/4645

 

MARKET REPORT / ANALYSIS         

-Thursday the S&P 500 dipped about 0.3% to 3284.

-VIX dropped about 5% to 15.49.

-The yield on the 10-year Treasury was little changed at 1.588.

 

The S&P 500 tested Monday’s prior low in the morning; all afternoon the action was bullish with a strong move up into the close.  Has the market shrugged off over-stretched conditions and the corona-virus? Maybe.

 

CNBC said the bounce up was caused by the World Health Organization declaration that the coronavirus is a “Public Health Emergency.” I don’t see how that is going to solve the economic risks, but investors seem to think it will, at least based on today’s market action.

 

Internals were a bit off today.  We saw a huge number for unchanged volume.  This is thought by some to be a sign of investor confusion seen when the market changes direction.  While this seems logical, I’ve never been able to develop an indicator based on this stat because most of the time, high unchanged volume doesn’t seem to mean anything.  Still, sometimes it’s correct; I went back to 11 September of 2019 to find an unchanged volume higher than today’s.  That was the day before the top of a 13% pullback. 

 

Another odd number in the market internals was the high number of new 52 week-highs and a high number of new 52-week lows. Today, new-highs were 179 and new-lows were 111.  In a healthy market they are not usually both high.  It’s only one day of data, so we won’t worry yet, but this is the idea behind the Fosback Hi-Lo Logic Indicator.  It has jumped from a bullish low to leaning to the bear side. It isn’t bearish yet, but I was surprised how quickly this indicator has moved.

 

Utilities outpaced the S&P 500 today 0.93% to 0.31%. Utilities have outperformed the Index over the last 2-months too. That’s not a sign of a healthy market.

 

Overall, indicators are not optimistic. The daily sum of 20 Indicators improved from -12 to -8 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations dropped from -11 to -27. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

Down still seems most likely for the short-term, but I have less conviction now.

Major support levels are:

-50-dMA, now at 3209

-100-dMA, now at 3108

-200-dMA, now at 3010

It is very unlikely that any retreat would be lower than the 200-dMA.

 

It seems unlikely that the market will shrug off the coronavirus scare this week or next, but it might.  Markets rarely listen to me.  I’ll just watch the indicators and we’ll see if they improve. So far, they haven’t moved much.

 

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 29 January (The S&P 500 was too far above its 200-dMA when sentiment is considered.)

(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…

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

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

- I cut my Apple (AAPL) position in half Monday, but I still own a large position in AAPL.

- I cut my XLK position in half Monday, but I still own a large position in XLK.

 

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.

 

For more details, see NTSM Page at…

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

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained NEGATIVE / BEARISH 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 45% invested in stocks as of 27 January (down from 60%). This is a conservative 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

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

FOMC Rate Decision … EIA Crude Inventories … Virus = Economic Plague … The Establishment Fears You … Stock Market Analysis… ETF Trading … Dow 30 Ranking

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

 

FOMC RATE DECISION (MarketWatch)

“The Federal Reserve held its benchmark fed funds interest rate steady on Wednesday, as the economy stayed on a moderate growth path. The central bank’s description of the economy was unchanged from six weeks ago: the labor market remained strong, growth was helped by consumer spending, and inflation remained below the 2% target…Fed officials have said it would take a “material” change in the outlook for the Fed to ease monetary policy further.” Story at… 

https://www.marketwatch.com/story/fed-holds-benchmark-interest-rate-steady-sees-economy-growing-at-moderate-pace-2020-01-29?mod=home-page

 

EIA CRUDE INVENTORIES (OilPrice.com)

“Crude oil headed lower today, reversing a rally after the Energy Information Administration reported a build in oil inventories of 3.5 million barrels for the week to January 24.” Story at...

https://oilprice.com/Energy/Energy-General/Oil-Slides-On-Rising-Crude-Inventories.html

 

VIRUS = ECONOMIC PLAGUE (Blaine’s Morning Porridge)

"It’s clear any business connected with China is going to suffer some form of Q1 hit from the impact in China. We still don’t know how much more economic damage may be inflicted from policy responses to the virus.  Firms like Honda are shuttering China factories. Plans to evacuate foreign nationals from China are being put in place – will they all be put in quarantine?  Don’t discount CoronaVirus. It is not over yet.” -  Bill Blain, Strategist at Shard Capital, London. Commentary at…
https://morningporridge.com/the-morning-porridge/f/blains-morning-porridge---29-jan-2020-virus-economic-plague

 
THE ESTABLISHMENT FEARS YOU, NOT POLITICIANS (CaitlanJohnson.com)

“…the Bush administration didn’t truly end. All of its imperialist, power-serving agendas remained in place and were expanded under the apparent oversight of the following administration. The same thing happened after the Obama administration, and the same thing–whether in 2021 or 2025–will happen after the Trump administration. The disturbing fact of the matter is that if you ignore election dates and just look at the numbers and raw data of US government behavior over the years, you can’t really tell who is president or which political party is in power at any given point in time.” - Caitlin Johnstone, Rogue Journalist. Commentary at…

https://medium.com/@caityjohnstone/the-establishment-doesnt-fear-trump-and-it-doesn-t-fear-bernie-it-fears-you-acb8fcd086b3

My cmt: Thought provoking. Read at your own risk.

 

MARKET REPORT / ANALYSIS         

-Wednesday the S&P 500 dipped about 0.1% to 3273.

-VIX dropped about 11% to 16.39.

-The yield on the 10-year Treasury slipped to 1.583.

 

The high for the day was a few minutes after 2PM when the FOMC rate decision was released.  Afterward, the Index fell for the rest of the afternoon (with a few failed rallies along the way) and finished nearly 20 points off the high. That’s a bearish close! Smart Money (based on late-day-action) was falling all thru December signaling that the Pros were selling. This metric began improving in January, but peaked last week. The Pros are leaning slightly bearish at this point.

 

Overall, indicators are not optimistic. The daily sum of 20 Indicators was unchanged at -12 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations dropped from +7 to -11. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

Down still seems most likely for the short-term.

Major support levels are:

-50-dMA, now at 3206

-100-dMA, now at 3105

-200-dMA, now at 3008

It is very unlikely that any retreat would be lower than the 200-dMA.

 

I took some money off the table by cutting stock allocations Monday. Going forward, we will be trying to identify a buying opportunity…assuming a dip evolves. If I am right, that could be a few weeks out. If not, I’ll have to sit out for a while – the S&P 500 is already stretched, so it will be hard to get back in unless we see some solid buy-signals.

 

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

Today’s Reading: -1 

Most Recent Day with a value other than Zero: -1 on 29 January (The S&P 500 was too far above its 200-dMA when sentiment is considered.)

(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…

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

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

- I cut my Apple (AAPL) position in half Monday, but I still own a large position in AAPL.

- I cut my XLK position in half Monday, but I still own a large position in XLK.

 

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.

 

For more details, see NTSM Page at…

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

 

WEDNESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained NEGATIVE / BEARISH 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 45% invested in stocks as of 27 January (down from 60%). This is a conservative 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

Wednesday, the VIX indicator was bearish; PRICE, VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator remained HOLD.

Durable Orders … Consumer Confidence … Richmond FED Manufacturing …. Dallas FED Manufacturing … Stock Market Analysis… ETF Trading … Dow 30 Ranking

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

 

DURABLE ORDERS / CONSUMER CONFIDENCE (Reuters)

“New orders for key U.S.-made capital goods dropped by the most in eight months in December and shipments were weak, suggesting business investment contracted further in the fourth quarter and remained a drag on economic growth… the longest economic expansion on record looks set to continue, with other data on Tuesday showing consumer confidence surged to a five-month high in January amid optimism over the labor market.” Story at…

https://www.reuters.com/article/us-usa-economy/us-business-investment-weak-consumer-confidence-at-five-month-high-idUSKBN1ZR1P7

 

RICHMOND FED MANUFACTURING (Advisor Perspectives)

“Fifth District manufacturing activity rebounded in January, according to the most recent survey from the Richmond Fed. The composite index rose from −5 in December to 20 in January, as all three components—shipments, new orders, and employment—increased.” Story at…

https://www.advisorperspectives.com/dshort/updates/2020/01/28/richmond-fed-manufacturing-rebounded-in-january 

 

DALLAS FED MANUFACTURING (Advisor Perspectives)

“Growth in Texas factory activity accelerated in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose seven points to 10.5, suggesting stronger output growth than last month.” Story at…

https://www.advisorperspectives.com/dshort/updates/2020/01/28/dallas-fed-manufacturing-outlook-growth-in-texas-manufacturing-activity-picks-up

 

MARKET REPORT / ANALYSIS         

-Tuesday the S&P 500 rose about 1% to 3276.

-VIX dropped about 11% to 16.28.

-The yield on the 10-year Treasury rose to 1.659.

 

I trimmed stock holdings yesterday based on the sharp drop Friday and Monday and news over the Chinese coronavirus. Whether that will prove to be the correct move remains to be seen. My short-term indicator (based on market internals) gave a bear signal Monday, so short term it wasn’t solely a “trade-what-you-think” moment.  That’s what we try to avoid – we want to react to the markets, not emotions.

 

So, what is the market saying today? Was today a turn-around-Tuesday when the market shrugs off prior losses during a pullback? Let’s look at some numbers…

 

Today was a statistically significant up-day. That just means that the price-volume move exceeded my statistical parameters. Statistics show that a statistically-significant, up-day is followed by a down-day about 60% of the time. Further, it is the third statistically significant day in a row and the sixth in the last 3 weeks. That is the type of action often seen at tops. As noted previously, we could see some choppy movement before the market decides where it wants to go. 

 

Bear Signs: MACD of breadth on the NYSE and MACD of S&P 500 price both have bearish crossovers; only 49% of stocks on the NYSE have been p over the last 2-weeks; Money Trend is below zero and falling; new-high/new-low data is bearish; Smart Money (late-day action) is bearish; VIX is climbing too fast; Utilities are outperforming the S&P 500. The S&P 500 is 9% above its 200-dMA. 10-15% above the 200-dMA is a bearish signal. There are not many bull signs now. Overall…

 

The daily sum of 20 Indicators improved from -13 to -12 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations dropped from +25 to +7. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

Down seems most likely for the short-term.

Major support levels are:

-50-dMA, now at 3199

-100-dMA, now at 3098

-200-dMA, now at 3005

It is very unlikely that any retreat would be lower than the 200-dMA.

 

I took some money off the table by cutting stock allocations Monday. Going forward, we will be trying to identify a buying opportunity…assuming this dip continues. If I am right, that could be a few weeks out. If not, I’ll have to sit out for a while – the S&P 500 is already stretched again, so it will be hard to get back in unless we see some solid buy signals.

 

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

Today’s Reading: -1 

Most Recent Day with a value other than Zero: -1 on 28 January (The S&P 500 was too far above its 200-dMA when sentiment is considered.)

(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…

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

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

-Apple (AAPL) reports 28 January. I cut my Apple position in half Monday, but I still own a large position in AAPL.

- I cut my XLK position in half Monday, but I still own a large position in XLK.

 

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.

 

For more details, see NTSM Page at…

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

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained NEGATIVE / BEARISH 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 45% invested in stocks as of 27 January (down from 60%). This is a conservative 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 VIX indicator was bearish; PRICE, VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator remained HOLD.

Kansas City FED Manufacturing … Coronavirus … Ignore the Fake Global Warming Debate … Stock Market Analysis… ETF Trading … Dow 30 Ranking

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

 

KANSAS CITY FED SURVEY (Advisor Perspectives)

“Regional factory activity was down only slightly in January, and firms reported a modest increase in employment,” said Wilkerson. 'Contacts reported slightly less difficulty finding workers than six months ago, but still over 60 percent of firms were experiencing labor shortages'…Let's compare all five Regional Manufacturing indicators. Here is a three-month moving average overlay of each since 2001 (for those with data).”

Analysis and more charts at…

https://www.advisorperspectives.com/dshort/updates/2020/01/23/kansas-city-fed-survey-january-update

 

CORONAVIRUS (CNN)

“82 people are dead and more than 2,700 cases have been confirmed in mainland China, as the Wuhan coronavirus continues to spread throughout Asia and the rest of the world…People can spread the virus before symptoms show, China's health minister said Sunday, complicating efforts to contain the outbreak.

https://www.cnn.com/asia/live-news/coronavirus-outbreak-01-27-20-intl-hnk/index.html

My cmt:  One wonders how many people have traveled from Wuhan province to the US. I would expect the numbers to be very small.  As a result, I am impressed by the fact that so many cases are showing up on the US.  Now there has been a death in Beijing. I don’t want to get too wound up over this; it just seems to me that markets will be in flux until we get a lot more information.  

 

IGNORE THE FAKE CLIMATE DEBATE (WSJ)

“Beyond the headlines and social media, where Greta Thunberg, Donald Trump and the online armies of climate “alarmists” and “deniers” do battle, there is a real climate debate bubbling along in scientific journals, conferences and, occasionally, even in the halls of Congress. It gets a lot less attention than the boisterous and fake debate that dominates our public discourse, but it is much more relevant to how the world might actually address the problem. In the real climate debate, no one denies the relationship between human emissions of greenhouse gases and a warming climate. Instead, the disagreement comes down to different views of climate risk in the face of multiple, cascading uncertainties….the world is unlikely to cut emissions fast enough to stabilize global temperatures at less than 2 degrees Celsius above pre-industrial levels, the long-standing international target, much less 1.5 degrees, as many activists now demand. But recent forecasts also suggest that many of the worst-case climate scenarios produced in the last decade, which assumed unbounded economic growth and fossil-fuel development, are also very unlikely…continuing political, economic and technological modernization, not a radical remaking of society, is the key to both slowing climate change and adapting to it.”  - WSJ  

https://www.wsj.com/articles/ignore-the-fake-climate-debate-11579795816

 

MARKET REPORT / ANALYSIS         

-Monday the S&P 500 fell about 1.6% to 3244.

-VIX jumped about 25% to 18.23.

-The yield on the 10-year Treasury slipped to 1.610.

 

Markets have been stretched for some time as we have previously noted here. My calm-before-the-storm indicator warned through most of Nov-Dec and again from 13 Jan to 24 Jan. Now it has morphed into a panic indicator as statistically the marked volatility has jumped up significantly. As a result, we would expect to see further declines in stock markets; I don’t see the concerns over the coronavirus going away overnight. Good earnings would go a long way to calm fears, but forward-looking statement may not be as optimistic as the numbers.  Perhaps companies have much better information than the news media, but I doubt it.  

 

It seems unlikely that the disease will be a major problem in the US, but it could affect production in China as well as the Chinese economy – both could affect US stock prices.

 

I had hoped that we would see a valuation top where we would get a clear sell-signal warning from the indicators.  That wasn’t to be, as news has once again trumped technicals.

 

As we noted last week, today was a statistically significant down-day. That just means that the price-volume move exceeded my statistical parameters. Statistics show that a statistically-significant, down-day is followed by an up-day about 60% of the time. We could see some choppy movement before the market decides where it wants to go.  Down seems most likely for the short-term.

 

The daily sum of 20 Indicators slipped from -5 to -13 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations dropped from +40 to +25. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I remain bullish in the long-term; short-term, the dip is here.

 

The coronavirus will worry markets until we get a better handle on its impacts.

 

I have been suggesting that any pullback should be small (about 5%). The evidence to support that is two-fold: (1) the number of new, 52-week highs has been increasing when the S&P 500 has been making new-highs; (2) the Fosback New-High/New-Low Logic Index remains much closer to a buy than a sell. We can be a little more concerned now that we have a news driven decline – the news can always get worse driving markets lower.

Major support levels are:

-50-dMA, now at 3199

-100-dMA, now at 3098

-200-dMA, now at 3005

It is very unlikely that any retreat would be lower than the 200-dMA.

 

I took some money off the table by cutting stock allocations. Going forward, we will be trying to identify a buying opportunity…assuming this dip continues. If I am right, that could be a few weeks out.

 

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 24 January (The S&P 500 was too far above its 200-dMA when sentiment is considered.)

(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…

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

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

-Apple (AAPL) reports 28 January. I cut my Apple position in half, but I still own a large position in AAPL.

- I cut my XLK position in half, but I still own a large position in XLK.

 

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.

 

For more details, see NTSM Page at…

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

 

MONAY MARKET INTERNALS (NYSE DATA)

Market Internals declined to NEGATIVE / BEARISH 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 45% invested in stocks as of 27 January (down from 60%). This is a conservative 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 VIX indicator was bearish; PRICE, VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator remained HOLD.