“The number of Americans filing applications for unemployment
benefits dropped from near a 1-1/2-year high last week, but the decline was
less than expected, suggesting some moderation in the pace of job growth.”
Story at…
S&P 500 NOW PROJECTED TO REPORT A YEAR-OVER-YEAR
DECLINE IN EARNINGS IN Q1 2019 (FactSet)
“During the month of January, analysts lowered earnings
estimates for companies in the S&P 500 for the first quarter. The Q1
bottom-up EPS estimate (which is an aggregation of the median EPS estimates for
all the companies in the index) dropped by 4.1% (to $38.55 from $40.21) during
this period…the first quarter marked the largest decline in the bottom-up EPS
estimate during the first month of a quarter since Q1 2016 (-5.5%).” Analysis
at…
TOO FAST AND FURIOUS (Real Investment Advice)
“As I noted in the Christmas report, we were looking for
an oversold retracement rally to push stocks back toward the previous
October-November closing lows of 2600-2650. The rally has hit, and slightly
exceeded those original estimates….A rally of this magnitude will get the
mainstream media very convinced the ‘bear market’ is now over.” It is
too early to suggest the “bear market of 2018” is officially over.
But, the rally has simply been “Too Fast, Too Furious,” completely
discounting the deteriorating fundamental underpinnings…” – Lance Roberts.
Commentary at…
CORRECTION UPDATE
This is day 95 of this correction (assuming we haven’t
made a bottom yet – I count top to bottom).
As of today’s close, the Index is down 7.8% (19.8% max) from its prior
high and has included 21 new-lows. In recent years only the 2011 correction
contained 21 new-lows. That correction bottomed at 19.4% and took 108-days to
complete, top to bottom.
Over the last 20-years (excluding major crashes and the
current year) there have been 2 corrections that exceeded 19%, in 1998 and
2011. In 2011, the waterfall phase (nearly straight down with little or no
bounces) took place over 3-weeks (about 15-trading sessions) and included a 17%
drop with almost no relief. In 2018, the waterfall phase that ended Christmas
Eve lasted 3-weeks over 15-trading sessions and included a drop of 16%. Both the 1998 and 2011 corrections included a
retest of the low as have all corrections greater than 15% in the last
50-years.
The S&P 500 Index is now
1.4% below its 200-dMA.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped about 0.9% to 2706.
-VIX rose about 6% to 16.37.
-The yield on the 10-year Treasury slipped to 2.646%.
The S&P 500 Index dropped below the 100-dMA today and
is now 1.4% below the 200-dMA. The buying stampede seems to be over, so some
backing and filling is likely. My guess is that the Index will make another run
at the 200-dMA before we see any meaningful retreat.
My daily sum of 17 Indicators slipped from +12 to +9 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +84 to +89.
The Smart Money (based on late-day-action) continues up
and we saw buying late in the session today. Late-day action has been positive
since the week before Christmas so traders have been bullish for some time. On
the other side of the fence…
The overbought/oversold index (advance-decline ratio) has
been overbought for more than a month. This indicator is usually early, but this
is still a long run of overbought indications. Other indicators look like they
are rolling over, too, so perhaps we’ll see the Index slip down.
The key still looks like the 200-dMA. Can the S&P 500
power thru its 200-day as it has thru the other levels of resistance? The Index
will need to test the 200-day repeatedly before we’ll know.
Repeating what I’ve been saying for a while:
A “V”-bottom is very unusual and I don’t think it is
likely that this correction will race to a top without a retest of the prior
low at 2351. I sold the rally and cut my stock holdings back to about 30%, 9
January to reduce risk. Only a retest at the 2351 level, or a climb back above
the old highs (not likely without a retest), will tell us whether 2351 was THE
bottom.
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.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
POSITIVE on the market. (The reading is not very strong since some charts of
the indicators are very nearly flat, i.e., the signals are not strong.)
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).
My current stock allocation is about 30% invested in
stocks on as of 9 January 2019. For me, fully invested is a balanced 50% stock
portfolio so this is a very conservative position.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the Price
and VIX indicators were positive. The Sentiment and Volume indicators were
neutral. Overall this is a BULLISH indication.
