“The number of Americans filing for unemployment benefits
unexpectedly fell last week, dropping to its lowest level in nearly 45 years as
the labor market tightened further, bolstering expectations of faster wage
growth this year…Initial claims for state unemployment benefits decreased 9,000
to a seasonally adjusted 221,000 for the week ended Feb. 3…” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped 3.75% to 2581.
-VIX jumped about 21% to 33.46. (XIV has blown up and
should not be traded; it fell another 20% to 5.1. That’s down 95% in less than
5-days. Some trade huh?)
-The yield on the 10-year Treasury was little changed at
a high 2.826%.
- My sum of 17 Indicators improved from -10 to -8 today.
(A “-” number means that most indicators are bearish.) It’s good to see some
improvement, but smoothed versions of this indicator (designed to avoid the
daily fluctuation) indicate that the sum of indicators remains sharply bearish.
But really, the indicators are not that important at this point.
Now we need to observe the data as the Index falls and
watch especially for falling volume. Currently, volume is actually increasing as
the Index has declined suggesting that investors remain concerned and selling
is increasing. Until we see less volume, selling is likely to continue.
We can’t say how much further the S&P 500 may fall,
but there will probably be a retest of today’s low of 2581 before this correction
ends. There is still a lot of fear. I suggested early on that a test of the 200-dMA
seemed likely. The Index is now only
1.7% above the 200-day. Perhaps the Index will hold around 2540 (the 200-day).
We’ll see. The “average” of 8-corrections since 2009 (excluding the 2009 crash)
has lasted about 50-trading days and bottomed with a 12% loss, top to bottom. The
shortest was 20-trading days long; the longest was 108. Thursday was day-10;
Thursday the S&P 500 was down 10.2% from the top.
I am bearish short-term…isn’t everybody? Well, "No." So far, there still aren't too many bears. We need to see more bears before we'll know we
getting closer to a bottom.
Longer term, my long-term indicator remained negative,
but since I have already dropped stock holdings to 40% I am not planning to
make further changes now. If the market recovers while Indicators remain
negative, I’ll be a seller again. (The longer-term indicator is probably not as
long term as we might like. It calls a
top, but it probably doesn’t differentiate between corrections and bear markets.
For now, I’d need to see
the 150-dMA in Breadth (%-advancing stocks on the NYSE) fall below 50% before
I’d be concerned that a crash is in the works. Another high-volume day would be
a worry too. For now, I don’t think we are facing a full-blown bear market, but
that is mostly a guess.
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…
THURSDAY 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
Thursday, 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 10%.
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.
