“Just because we were easily able to fund deficits of
years past does not mean we should be so naïve as to think it will be easy
going forward. As described above, the circumstances we face today are far more
challenging than those of past years. The confluence of these events argues that
investors should prepare for a new paradigm and not get caught flatfooted
trusting in outdated narratives.” Commentary at…
My cmt: In the commentary, Michael Lebowitz, CFA,
explains why the forces of Supply and Demand may not support financing the debt.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 1.6% to 2747.
-VIX was DOWN about 12% to 16.49.
-The yield on the 10-year Treasury slipped to 2.866%.
Line in the Sand.
The Bulls were out in force Friday as panicked buyers
were afraid of being left at the station since the S&P 500 has been rising rapidly
from its 8 Feb bottom. The move made Friday a statistically-significant day.
That just means that the price-volume move up exceeded statistical parameters
that I track. The stats show that about 60% of the time a statistically
significant move up will be followed by a down-day the next day.
More importantly, most tops are
statistically-significant. That doesn’t
guarantee that Friday was a top, but the Index is close to the upper Fibonacci
retracement point and many believe this would be a top based solely on the Fibonacci
retracement. Further, so far, we have been following the correction scenario
that includes an area of trouble followed a waterfall drop (its over – we think);
a bounce; and then a retracement. To me, data suggests that the Bounce is over
and we go down from here; but there is evidence to suggest the Index simply
keeps going up...
…The Index broke above the 50-dMA Friday; there have been
3 days after the bottom with fairly high up-volume (80%); VIX is half what it
was at the bottom; there are probably more signs, but I am not convinced. In my book, a reversal is indicated by up-days
with extreme up-volume (90%) or back-to-back 80% up-volume days and we did not see
that.
Bottom line: The line in the sand is where we closed Friday
- 2747. If we go up from here, I’ll be a
buyer of stocks. Otherwise, I’ll watch for a retest of the 2581 low.
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…
FRIDAY 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
Friday, VIX was
negative; Volume was positive; Sentiment and Price were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I remain 40%
invested in stocks and 60% in cash/bonds as of 31 Jan (A comparable TSP
allocation would be 40% in the S&P 500 Index fund (C-Fund) with the
remainder 60% G-Fund (Government securities).
