“U.S. central bankers sent a strong message Wednesday
that an expansion with “substantial underlying economic momentum” could sustain
additional increases in interest rates this year. Federal Reserve officials
“anticipated that the rate of economic growth in 2018 would exceed their
estimates of its sustainable longer-run pace and that labor market conditions
would strengthen further,” the minutes of their Jan. 30-31 meeting released in
Washington on Wednesday showed.” Story at…
HOME SALES (USA Today)
“U.S. sales of existing homes fell in January from a year
earlier by the most in more than three years. Would-be buyers were stymied by
rising prices and a shortage of homes for sale. The National Association of
Realtors said Wednesday that sales dropped 3.2% from December to January…”
Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was down about 0.6% to 2701. (The
market started falling as soon as the FOMC minutes were released.)
-VIX was DOWN about 3% to 20.02.
-The yield on the 10-year Treasury rose to 2.949%. (This doesn’t
look good.)
What an ugly close! The S&P 500 dropped more than 1%
after the FOMC minutes were released at 2PM. They continued down into the
close. Closing Tick (sum of the last trades of the day) was a bearish -488.
Yields have been rising since September. This isn’t good
for the markets. Sounds like an understatement, right? It is obvious, but I
point it out as further evidence that this correction may not end next week as
many bulls think.
Sentiment (measured as %-Bulls (Bulls/{bulls+bears})
based on the amounts invested in Rydex/Guggenheim mutual funds) was 68% last
Thursday. Tuesday it was 86%-bulls. As it climbs higher, a return to recent
lows becomes more likely.
The S&P 500 remains down 6% from its recent high;
this is day 18 in the correction. If the bottom was 8 Feb (the recent low),
then this “correction” lasted 10-days top to bottom. A 2-week correction is awfully short and
difficult to believe.
My sum of 17 Indicators dropped from +6 to +3 today – a bearish
indication. The smoothed version has turned up and is bullish. I’d be surprised
if Indicators weren’t turning more positive after the 5% bull-move we’ve had
recently. At this point the chart and 50-dMA is more important than the
indicators.
We still can’t guess whether there will be a retest of
the low or not. A typical correction includes a waterfall collapse (it seems to
be over) followed by a bounce (we got the bounce), a lot of choppiness and then
a retest of the low over a period of about 50-trading days. We’ll see. It is
all up to the chart. Friday the S&P 500 was sitting slightly (0.3%) above
50-dMA; now it’s 1% below it. The 50-dMA
is a critical point for the Index. If we can break significantly above the
50-dMA and stay there for a few days it would suggest this correction is more
likely to end quickly.
The market was down 1.7% when I suggested that I was reducing
stock exposure to 40% based on numerous negative indicators. It remains to be
seen whether I’ll make money on that call. I am positioned for a retest of the correction
low. If it turns out to be a successful retest, I’ll be back in stronger than
before.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to 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
Wednesday, VIX
was negative; Volume, 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 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). For non-Government employees holding short-term
bonds would be OK rather than 60% cash.
