“…the bottoming process was picture perfect. We called
the downturn, last Tuesday’s selling climax [mid-day], the subsequent failed
throwback rally [Wednesday], and Friday’s undercut low (the print low below
last Tuesday’s selling climax low). Indeed, “picture perfect!” Our energy
models are calling for an upside energy whoosh this week, so we think the
selling stampede is over!” – Jeffrey Saut. Commentary at…
CORRECTION OVER? – MAYBE, MAYBE NOT (Financial Sense)
“I want to highlight again my belief that this market
selloff is all about rising interest rates and a slowing flow of liquidity from
the Fed, ECB, and BoJ. Yes, the global economy is good and earnings have been
solid but for at least right now, this is a P/E multiple reassessments as the
positive fundamentals have been FULLY priced in and then some…I hear all the
time, a bear market can't happen until we get a recession which for most of the
history of the US stock market that was true. But, the last two recessions were
caused by falling asset prices and the next one we get, whenever that might
happen, will be driven by rising interest rates, a fall in stocks and a
subsequent drop in consumer spending and investment.” Peter Boockvar.
Commentary at…
RISK/REWARD BIASED TO THE UP-SIDE (Financial Sense)
“So what happens next? Prior falls like this have led to
quick recoveries. That likelihood is further supported by a washout in breadth,
volatility and several measures of sentiment. Moreover, the fundamental
backdrop remains excellent. Risk/reward is heavily biased towards upside in the
near term. That said, strong down momentum normally reverberates into the weeks
ahead. Equities sometimes "V bounce" but more often form a double
bottom. A low retest in the not too distant future remains a greater than 50%
probability. The longer-term outlook for US equities is unchanged and
favorable.” – Urban Carmel. Commentary at…
SENTIMENT
On a 5-day basis, %-Bulls was 89%-Bulls Friday. That’s a
slight drop from the recent high of 91%-Bulls, but it still remains at levels
seen during the dot.com collapse. It still surprises me that there is so much
bullishness. As I’ve said for a while, this suggests the S&P 500 will make
a new low at some point before the correction ends. Strong bullishness in this
indicator is a bearish sign.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 1.4% to 2656.
-VIX was down about 12% to 25.61.
-The yield on the 10-year Treasury rose to 2.859%.
Recently, I have provided some stats on corrections since
2009. I noticed the WSJ gave stats that showed only 4-corrections since 2009 while
I stated there were 8. I used a 7% drop
as my correction number while the Journal used the more traditional 10-days to
define a correction.
As for this one, there were positive signs today especially
up-volume that was very positive. It just
isn’t positive enough for me to call an all clear. Further, New-high/new-low
data remains stubbornly negative, but that could change if the bullish move
continues. I like Jeffery Saut’s analysis in the above “Correction Over” article,
but his discussion of the mid-day selling climax is not a methodology I have been
able to use. It’s tough enough to call an end to a correction using closing
data – calling an end to a correction mid-day is not in my analysis tool-box. In addition, I’ve
not seen a correction where the new-high/new-low data didn’t confirm the end of
the correction and so far, it has not. If I can get a confirmation based on
closing data, I’ll post it.
One other thing that bothers me about the mid-day
analysis: the bounce from the 200-dMA was almost certainly a product of computer
driven buying. I’d like to be sure that humans follow-thru.
My sum of 17 Indicators was again unchanged at -8 today.
(A “-” number means that most indicators are bearish.) Smoothed versions of
this indicator (designed to avoid the daily fluctuation) show that the sum of
indicators remains sharply bearish.
The S&P 500 was down 7.5% from its recent high; this
is day-12 in the correction.
Bottom line: It still looks like we’ve got a ways to go
but, there is a possibility this could be the “V” bottom that the Bulls dream
about. I remain somewhat skeptical, but if
we have another strong up-day Tuesday with high up-volume, I think we can say
the correction is over for the time being.
Longer term I am bullish.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
In corrections
this chart may be less valuable – all stocks are falling.
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)
In corrections
this chart may be less valuable – all stocks are falling.
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained Neutral 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).
LONG TERM INDICATOR
Monday,
Sentiment, Volume and VIX Indicators were negative; Price remained neutral. My
system is designed to call tops and bottoms, but I don’t know how far the
market may fall once we have a sell-signal. While the model currently says
sell; that may not be the best move since we are already down significantly
from the top.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I shifted to a
conservative 40% invested in stocks and 60% in cash on 31 Jan. For the TSP,
that would be 40% in the S&P 500 Index fund (C-Fund) with the remainder 60%
G-Fund (Government securities) on 31 Jan.
