“A resident of Solano County, California, who has novel coronavirus might be the first example in the
country of "community spread," a situation in which the patient did
not have "relevant travel history or exposure to another known
patient," the US Centers for Disease Control and Prevention said
Wednesday. The person's "exposure is unknown," the CDC said in a news
release.” Story at…
DURABLE ORDERS (MarketWatch)
“U.S. orders for durable goods fell slightly in January
owing to a reversal in bookings for military weapons and less demand for new
cars and trucks, but business investment is still soft and likely to remain so
in light of disruptions to the global economy from a spreading coronavirus. Durable-goods
orders dipped 0.2% last month, the government said Thursday.” Story at…
JOBLESS CLAIMS (MarketWatch)
“The number of people who applied for U.S. unemployment
benefits in late February rose by 8,000 to a one-month high of 219,000, but
initial jobless claims still aren't far off from a 50-year low.” Story at…
GDP-SECOND ESTIMATE (Bloomberg)
“Underlying demand in the U.S. economy was slower than
initially reported at the end of last year, putting growth on a weaker footing
ahead of risks from the coronavirus in 2020. Upwardly revised contributions
from trade and inventories kept gross domestic product expanding at a solid
2.1% annualized rate in the fourth quarter…” Story at…
CASS TRANSPORTATION INDEX (CASS Information Systems)
“The turn of the calendar didn’t leave the bad news in
2019, as the Cass Freight Index showed continued weakness in the U.S. freight
market. Both the shipments and expenditures components of the Cass Freight
Index worsened sequentially and showed decelerating y/y growth… Shipment volumes dropped 9.4% in
January vs 2019 levels…as the index posted its lowest absolute reading in
roughly three years. It was also the steepest y/y decline since 2009.” January CASS
Transportation Index report at…
WEALTHY AMERICANS PAY THEIR SHARE (WSJ)
“The claim that rich Americans pay a smaller share of
their income in taxes than any other households is verifiably false…Data from
the Organization for Economic Cooperation and Development show that the U.S.
has the most progressive income tax system in the world, with the top 10% of
earners paying 45% of all income taxes, including Social Security and Medicare
taxes, compared with only 28% in France and 27% in Sweden. If the U.S.
government spent as large a share of gross domestic product and had the same
tax structure as France, the top 10% of U.S. earners would pay about what they
pay now in income taxes, but the bottom 90% would see their taxes almost
double.” Analysis at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped about 4.4% to 2979.
-VIX jumped about 42% to 39.16.
-The yield on the 10-year Treasury fell to 1.267 (a
record low per CNBC).
Wow. A week ago,
the talking heads on CNBC said there would be no impact from the Coronavirus. Today was brutal. There was a strong end-of-day
selloff and the S&P 500 Index closed 2.2% below its 200-dMA. The next
support level is the 8 October low: 2893.
As of today, the Index is 12% off of its recent high. The
“average” correction has been 12% since 2009. In the past 15 years or so,
corrections greater than 10% have lasted 68 days top to bottom; those less than
10% have lasted 35 days. We’re at day 6.
Overall, the daily sum of 20 Indicators declined from
-12 to -13 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from -45 to -65.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
We continue to see the market getting so bad that it is signaling
a bounce. Recently, we have been making new-lows on higher volume. The drop will stop when we run out of sellers
and volume falls.
Examining high closing-volumes in the past, we note that
today’s high-volume was about equal to the day before we made a bottom for the
20% correction in December 2018; and it was higher than the volume the day
before the bottom of the 16% correction of July of 2010. This is no sure thing
though; there were numerous days (and I mean a lot) when the volume exceeded
today’s volume during the Financial Crash. Are we headed for a major 50%+
crash? I don’t think so unless the virus takes down the US economy..
We see a number of oversold indications: Bollinger Bands;
RSI; Advance/Decline Ratio; and values for the Last Hour Smart Money Index were
all oversold.
We also note that we have seen 8 down-days in the last 10
days. Another down-day Friday would give a buy signal for this %-up indicator. It’s
only 1 indicator though, and it wouldn’t be enough to give a buy signal
overall.
The Panic Indicator was activated again today due to the
huge jump in price-volume. (This
indicator measures moves in standard deviation of price-volume.) This is the second
signal this week and the third since 27 January. Now, the extreme jump may be
signaling a bottom.
Utilities fell further than the S&P 500 today, and the
cyclicals fell less than the S&P 500.
A small sign of a possible bottom coming.
Negative signs remain though. We saw two 90% down
days that met tests for 90% down days as defined by Lowry research this week. The point here is best described by Lowry: “…our
69-year record shows that declines containing two or more 90% Downside Days
usually persist, on a trend basis, until investors eventually come rushing back
in to snap up what they perceive to be the bargains of the decade and, in the
process, produce a 90% Upside Day" - Lowry Research. This is a powerful indicator and we’ll be
looking for a reversal 90% up-volume day.
Jeffrey Saut wrote about what he called 17- to 25-session
“selling stampedes.” We may be in one now. Coincidentally, he wrote in 2016 that
“…in election years there is a tendency to sink a low in the January/February
timeframe leading to a rally into the spring.”
As I have said several times, it seems to me that stocks are
due for a bounce. After that, with this much pain in place, it seems most
likely that a retest of the lows in a month or two is likely. We’ll see. Let’s
look for a bounce Friday or early next week. I may even look for some stocks to buy.
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 27
February. (Bollinger Bands and RSI were bullish and late-day action is oversold.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
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)
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…
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 45% invested in
stocks as of 27 January (down from 60%). This is a conservative position
appropriate for a retiree based on an overstretched S&P 500. You may wish
to have a higher or lower % invested in stocks depending on your risk
tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the VOLUME, VIX, PRICE and PANIC Indicators
gave bear signals; The SENTIMENT Indicator was neutral. The Long-Term Indicator remained SELL. If the
averages are to be believed, we may not be too far from a bottom. I could be
wrong, but I think it is too late to sell now.
