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…
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…
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…
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)
*For additional background on the ETF ranking system see
NTSM Page at…
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.
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.
