“The problem, again, is that market internals are
presently suggesting a subtle shift toward risk-aversion among investors. In
the face of extreme valuations, investors face enormous downside risks, as they
did in 2000 and 2007. The present combination of record valuations and
divergent market internals, coming off of the most wicked “overvalued,
overbought, overbullish” extremes in history, creates a danger zone that will
not be resolved until some combination of those factors – valuations,
internals, and overextended conditions – shifts to a less dangerous mix.
As I did in 2000 and 2007, I mean these figures seriously
– not as hyperbole, but based on outcomes that would be historically standard,
normal, and commonplace given current valuation extremes. At present, we
project market losses over the completion of this cycle on the order of -64%
for the S&P 500 Index…” – John Hussman, PhD.
My cmt: I look at a different basket of Market Internals
than does John Hussman. Only time will
tell who is right. I also have a shorter-term view than he does, so with
my measures headed up, I think I am right in the short term. Longer term (and
that could be sooner than we think) I am getting more cautious.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.2% to 2863.
-VIX rose about 3% to 12.86
-The yield on the 10-year Treasury was 2.822% as of this
post.
Currently, my daily sum of 17 Indicators improved from +4
to +9 (a positive number is bullish) while the 10-day smoothed version that
negates the daily fluctuations improved from -36 to -28.
Overall, indicators are getting more bullish. Bollinger Bands are no longer exhibiting a
squeeze, but they are close to signaling overbought. RSI is still neutral so these two indicators taken
together are neutral. The biggest
negative sign, other than sentiment previously discussed in earlier blogs, is
Smart Money. This indicator is based on
late-day-action since that’s when the Pros trade. Currently, late-day-action is headed down. I
think they are too early to get bearish, but it could be just that traders don’t
want to hold positions overnight and they are taking profit, i.e., we could be
getting a false signal from the Smart money.
I remain fully invested…at least until we see some more
signs of trouble.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
POSITIVE 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).
I am now 50% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio. As a retiree, this is a position with which
I am comfortable unless I am in full defense mode or feeling especially
optimistic.
INTERMEDIATE / LONG-TERM INDICATOR
Intermediate/Long-Term
Indicator: Tuesday, the Price indicator was positive; Volume & VIX
indicators were neutral; Sentiment was bearish. Overall this is still a NEUTRAL
indication.
