ADP Employment … Crude Inventories … Stock Market Analysis… ETF Trading … Dow 30 Ranking

ADP EMPLOYMENT (MarketWatch)

“American employment picture continues to appear strong. ADP on Wednesday reported 227,000 new private-sector jobs in October. Economists polled by Econoday had expected 178,000 new jobs.” Story at…

https://www.marketwatch.com/story/us-creates-227000-private-sector-jobs-in-october-adp-says-2018-10-31-81031932?ns=prod/accounts-mw

 

CRUDE INVENTORIES (StreetInsider)

“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.2 million barrels from the previous week.” Story at… 

https://www.streetinsider.com/Commodities/UPDATE%3A+Crude+Inventory+%2B3.22M+Barrels+vs+%2B3.11M+Expected/14765350.html

 

MARKET REPORT / ANALYSIS         

-Wednesday the S&P 500 rose about 1.1% to 2712.

-VIX dropped about 5% to 21.23.

-The yield on the 10-year Treasury rose to 3.162% as of 11:17 pm.

 

Volume remained strong today, about 25% above the monthly average.  It’s a nice bullish sign, because it suggests some conviction behind the move up in the Index. 63% of the total volume was up-volume and 60% of stocks advanced today.

 

Money Trend indicator remains bullish. There was bearish late-day selling today that took the S&P 500 down over 1% in the last hour of trading. That suggested that the Pros were selling, a bearish indication, but that was offset by a bullish closing-tick (sum of last trades of the day) of +472…so not bad.

 

My daily sum of 17 Indicators improved from -7 to -3 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations improved from -45 to -42.

 

The 200-dMA is now 2765 and that is the resistance point the S&P 500 needs to move above.

 

Today is trading day 29 for this pullback. The drop is now 7.5% (9.9% max). (These numbers are based on closing data.) Over the last 10-years, for drops less than 10%, the average time from top to bottom has been 32-days to a final bottom, including a retest. (The low is usually at the retest.) Except for major crashes, the average correction was about 12% and lasted 53 trading-days including retests.

 

Just looking at prior corrections, it could be a month before we see a retest of the low, assuming we have a retest.  It is possible that the market will go straight up from here.  It’s not likely this time since the worries that caused the pullback are still hanging over the market and it didn’t look like we had a washout of sentiment.

 

So far, we have not had a successful test; without a successful test of the prior low of 2641, we can’t call an end to this retreat.

 

I remain bullish in the short-term.

 

MOMENTUM ANALYSIS:

(Momentum analysis is not useful in a selloff. As an example, Proctor and Gamble was 16^th last week – now because of a flight to safety - it is #2.  If the downturn ends, it will drop quickly again.) 

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

WEDNESDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved to Neutral.

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 - SELL

Wednesday, the Price indicator was positive; Sentiment was neutral; Volume and VIX indicators were negative. Overall this is a NEGATIVE indication. I am ignoring this longer-term indicator for the time being.  Short-term we expect a bounce to continue.

Consumer Confidence … Stock Market Analysis… ETF Trading … Dow 30 Ranking

CONSUMER CONFIDENCE (Conference Board)

“Consumer Confidence increased in October, following a modest gain in September, and remains at levels last seen in the fall of 2000 (September 2000, 142.5),” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of present-day conditions remains quite positive, primarily due to strong employment growth. The Expectations Index posted another gain in October, suggesting that consumers do not foresee the economy losing steam anytime soon. Rather, they expect the strong pace of growth to carry over into early 2019.” Press release at… 

https://www.conference-board.org/data/consumerconfidence.cfm

 

MARKET REPORT / ANALYSIS         

-Tuesday the S&P 500 rose about 1.6% to 2683.

-VIX dropped about 5% to 23.35.

-The yield on the 10-year Treasury rose to 3.121% as of 4:46 pm.

 

Today was the third day in a row with late-day buying (when the Pros are most active) and volume was a very strong, about 30% above the monthly average.  That’s a very bullish sign when one considers that volumes were already high due to the ongoing sell-off.  74% of the volume today was up-volume and 70% of all stocks on the NYSE were up as well.  3.3% of stocks on the NYSE made new 52-week highs today.  That’s not a great number, but it is higher than we’ve seen in the last 2-weeks. These, too, are bullish stats that suggest our call of a bottom yesterday was correct.

 

From here we expect a short-term rally back to the 200-dMA (2766) or possibly up to the 100-dMA (2822) about a 50% retracement). From there the most likely course would be a drop followed by a retest of the low.

 

My daily sum of 17 Indicators deteriorated, but today’s data is good enough to ignore the 10-day data for a few days.  Indicators dropped from -2 to -7 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations remained -45.

 

Today is trading day 28 for this pullback. The drop is now 8.5% (9.9% max). (These numbers are based on closing data.) Over the last 10-years, for drops less than 10%, the average time from top to bottom has been 32-days to a final bottom, including a retest. (The low is usually at the retest.) Except for major crashes, the average correction was about 12% and lasted 53 trading-days including retests.

 

Just looking at prior corrections, it could be a month before we see a retest of the low, assuming we have a retest.  It is possible that the market will go straight up from here.  It’s not likely this time since the worries that caused the pullback are still hanging over the market and it didn’t look like we had a washout of sentiment.

 

So far, we have not had a successful test; without a successful test of the prior low of 2641, we can’t call an end to this retreat.

 

MOMENTUM ANALYSIS:

(Momentum analysis is not useful in a selloff. As an example, Proctor and Gamble was 16^th last week – now because of a flight to safety - it is #2.  If the downturn ends, it will drop quickly again.) 

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals dropped to negative. Today’s numbers were good, but sometimes moving average numbers (like the internals) can be deceptive. I suspect this will turn around soon.

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 - SELL

Tuesday, the Price indicator was positive; Sentiment was neutral; Volume and VIX indicators were negative. Overall this is a NEGATIVE indication. I am ignoring this longer-term indicator for the time being.  Short-term we expect a bounce to continue.

Earnings … Personal Spending … PCE Prices … Market Trend Breakdown … Correction, Not Crash … 20% Rally Coming … Jeffrey Saut Commentary (Excerpt) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

EARNINGS (FactSet)

“To date, 48% of the companies in the S&P 500 have reported actual results for Q3. Companies are outperforming recent averages on the earnings side and performing in line with recent averages on the revenue side.” Story at…

https://insight.factset.com/sp-500-earnings-season-update-october-26-2018

My cmt: While bad sales from a couple of the FANG stocks (Amazon & Google {Alphabet}) dominated the news last week, as noted by FACTSET, the overall numbers are pretty good.

 

PERSONAL SPENDING / PCE PRICES (Reuters)

“U.S. consumer spending rose for a seventh straight month in September, but income recorded its smallest gain in more than a year on moderate wage growth, suggesting the current pace of spending was unlikely to be sustained…Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month…Prices continued to rise steadily in September. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent after being flat in August.” Story at…

https://www.reuters.com/article/us-usa-economy-spending/u-s-consumer-spending-rises-income-gain-smallest-in-15-months-idUSKCN1N31K9

The core PCE index increase was 2% year-over-year. That’s the inflation measure that is used by the FED and 2% is their target.

 

CONFIRMED MARKET TREND BREAKDOWN (Real Investment Advice)

“There is a very good chance that the sell-off will continue until U.S. stock indices hit their support zones at the early-2018 lows [2580], then they will bounce for a time, and attempt to break below their support zones. If and when the indices eventually close below their support zones, that would give yet another bearish signal that would likely foreshadow a decline to their 2015 highs [2130] (not that the bear market will stop there, but it’s the next step after a break below the early-2018 lows).” Commentary at…

https://realinvestmentadvice.com/the-markets-trend-breakdown-has-been-confirmed/

My cmt: The charts are pretty clear that strong support is around 2580.  That’s the line in the sand. A break there means real trouble ahead.

 

CORRECTION, NOT CRASH (Financial Sense)

“As we showed yesterday, the long-term MACD is close to making a bearish crossover and could signal an important shift in the market's trend and momentum. However, leading economic indicators and financial stress measures are not at levels consistent with a major market peak à la 2000 or 2007, which argues that we are witnessing a normal correction in the context of what is very likely a late-stage bull market.” – Cris Sheridan. Commentary at…

https://www.financialsense.com/cris-sheridan/late-stage-bull-market-correction

 

20% RALLY COMING (MarketWatch)

“Minerd, chief investment officer for Guggenheim and one of the world’s preeminent bond-fund managers, on Friday said that the recent rout has left the market relatively cheap, compared with its previous lofty levels, and that has created potential for stocks to surge higher in the next few weeks and months: “Stocks are cheap based on forward multiples and should rally by 15%-20%...” Story at…

https://www.marketwatch.com/story/stocks-could-rally-20-after-this-bruising-rout-says-guggenheims-minerd-but-then-watch-out-2018-10-26

 

JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)

“We look for a short-term trading bottom this week given the oversold nature of the equity markets. The ideal pattern would be for a sharp throwback rally that fails, leading to new short-term lows around the mid-November energy peak that should mark a major low with stocks trading higher into next year. While I abandoned trading positions on the October 2 “sell signal,” I have not disturbed long-term investment positions, believing we remain in a secular bull market that has years left to run. As our pal Leon Tuey (retired technical analyst extraordinaire) wrote last week: Great news! The market is grossly oversold and the sentiment indicators are giving super bullish readings (excessive pessimism).” Commentary at…

https://www.raymondjames.com/wealth-management/market-commentary-and-insights/investment-strategy

 

MARKET REPORT / ANALYSIS         

-Monday the S&P 500 dropped about 0.7% to 2641.

-VIX was up about 2% to 24.70. (Again, given the drop in the S&P 500, this is a low number. The options Boys think this might be over.)

-The yield on the 10-year Treasury rose slightly to 3.082% as of 4:46 pm. (Looks like the Bond Ghouls might think the correction is over too.)

 

Friday, we noticed some improved internals, positive action at the close and a positive closing tick (sum of final trades of the day) of +325 and commented that the Smart Money is starting to buy. While the S&P 500 was down again Monday, it’s about what I expected and the news wasn’t all bad. We saw a retest of the recent low of last week and volume was lower with some improved internals. Like Friday, today there was late-day buying and a positive closing tick (last trades of the day) of +152. In addition, based on last week’s commentary here in the NTSM blog, a bottom on Monday was not unexpected. I think we are here, finally, at least in the short-term.

 

A short-term rally should begin tomorrow (Tuesday) – perhaps after some early fireworks to the down side. The coming rally should carry us back to the 200-dMA or possibly up to the 100-dMA (about a 50% retracement). From there the most likely course would be a drop followed by a retest of the low. The rules are changing as computers are making the decisions on Wall Street and it is not clear that we “sheep” will be able to keep up. Still, a 50% retracement is probably about the best we can hope for.

 

Support is 2580, another 3.4% below today’s close. If I am wrong, a drop to 2580 would be likely this week, then followed by a turn-around.   

 

Today, my daily sum of 17 Indicators improved from -4 to -2 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations improved from -51 to -45.

 

Today is trading day 27 for this pullback. The drop is now 9.9% (9.9% max). Over the last 10-years, for drops less than 10%, the average time from top to bottom has been 32-days to a final bottom, including a retest. (The low is usually at the retest.) Except for major crashes, the average correction was about 12% and lasted 53 trading-days including retests.

 

Just looking at prior corrections, it could be a month before we see a retest of today’s low, assuming we have a retest.  It is possible that the market will go straight up from here, but it’s not likely this time since the worries that caused the pullback are still hanging over the market.

 

So far, we have not had a successful test; without a successful test of the prior low, we can’t call an end to this retreat. Today was not a successful test.

 

MOMENTUM ANALYSIS:

(Momentum analysis is not useful in a selloff. As an example, Proctor and Gamble was 16^th last week – now because of a flight to safety - it is #2.  If the downturn ends, it will drop quickly again.) 

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

MONDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Neutral. (Advancing volume is still up over the last smoothed 10-day value and new-high/new-low data improved.)

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 - SELL

Monday, the Price indicator was positive; Sentiment was neutral; Volume and VIX indicators were negative. Overall this is a NEGATIVE indication. I am not selling yet.  I think a turn-around will start soon.

GDP … Michigan Sentiment … Stock Market Analysis… ETF Trading … Dow 30

GDP (MarketWatch)

“Gross domestic product decelerated a bit to a 3.5% annual pace in the third quarter, down from torrid 4.2% pace in the prior three months… Expansion in the last two quarters is the fastest six months of growth in four years.” Story at…

https://www.marketwatch.com/story/third-quarter-gdp-cools-a-bit-to-a-still-solid-35-rate-2018-10-26

 

MICHIGAN SENTIMENT (CNBC)

"The University of Michigan’s monthly survey of consumers hit 100.1 in the final reading of September. “All households held very optimistic expectations for improved personal finances in the year ahead, the most favorable financial prospects since 2004,” Richard Curtin, chief economist for The University of Michigan’s survey…” Story at…

https://www.cnbc.com/2018/09/28/consumer-sentiment-september.html

 

MARKET REPORT / ANALYSIS         

-Friday the S&P 500 dropped about 1.7% to 2659.

-VIX was down a bit, but little changed at 24.16. (Given the drop in the S&P 500, this is odd. The options Boys may be starting to think this might be over?)

-The yield on the 10-year Treasury slipped to 3.077% as of 5:02 pm.

 

Never on Friday.  That’s the Wall Street wisdom regarding downtrends. It seems that downtrends rarely end on Friday – who wants to hold over the weekend in a downtrend?  Investors will worry over the weekend and sell on Monday. That sets up a chance for a turn-around Tuesday as cooler heads (the Smart Money) start buying on Tuesday, possibly after further morning selling.

 

Just for curiosity, I checked 10 corrections going back to 2009. Half of them did bottom on Monday so perhaps there’s something to “turn-around Tuesday” after all. Of the remainder, 3 bottomed on Thursday; 1 bottomed on Tuesday and 1 on Friday.

 

As we have noted in the past, bottoms often have a few days of big back and forth moves, up and down, so today was not unexpected, but we did see evidence of a bit of a turn-around today.  The S&P 500 was down almost 3% in the morning and rallied back to close down 1.7%. (Not good, but it could have been worse.) Although the Index was down at the close, it finished with some positive action and this is the first time in the last week and a half that there has been positive late-day action. In addition, closing tick (sum of final trades of the day) was +325. The Smart Money is starting to buy.

 

Every one of the 15 ETFs I track was down today – even utilities, XLU. Usually, the Pros are buying XLU as a safe haven if stocks are falling.  Perhaps the Pros are selling utilities to buy stocks – another hint that the Pros are starting to buy.

 

Today is trading day 26 for this pullback. The drop is now 9.3% (9.4% max). Over the last 10-years, for drops less than 10%, the average time from top to bottom has been 32-days to a final bottom, including a retest. (The low is usually at the retest.) Except for major crashes, the average correction was about 12% and lasted 53 trading-days including retests.

 

As noted yesterday: My inclination is to take a conservative, protect the portfolio position and cut back on stocks. One can make a case for cutting stocks now or waiting for a bounce. The averages and technicals suggest that this correction is almost over so waiting seems reasonable. The other option, cutting stock holdings now, saves potential losses, but will be disappointing if the market continues to bounce up.

 

Either way, without a successful test of the prior low, we can’t call an end to this retreat. Today was not a successful test.

 

I am going to watch the charts for another day or two.  I may sell some stocks if we don’t see some strong bottoming signs.

 

MOMENTUM ANALYSIS:

(Momentum analysis is not useful in a selloff. As an example, Proctor and Gamble was 16^th last week – now because of a flight to safety - it is #2.  If the downturn ends, it will drop quickly again.) 

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

FRIDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Neutral. (Advancing volume is still up over the last smoothed 10-day value.)

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 - SELL

Friday, the Price indicator was positive; Sentiment was neutral; Volume and VIX indicators were negative. Overall this is a NEGATIVE indication. I am going to watch the charts for another day or two.  I may sell some stocks if we don’t see more bottoming signs.

Durable Goods Orders … Jobless Claims … Stock Market Analysis… ETF Trading … Dow 30 Ranking

DURABLE ORDERS (Marketwatch)

“Orders for durable goods rose 0.8% in September, the government said Thursday, boosted by a sharp increase in orders for defense goods, which offset a fall in civilian aircraft orders…The headline was stronger than the details of the report. Orders for core capital goods, closely watched by economists, fell 0.1%.” Story at…

https://www.marketwatch.com/story/durable-goods-orders-up-08-in-september-on-strong-defense-orders-2018-10-25?ns=prod/accounts-mw

 

JOBLESS CLAIMS (Reuters)

“New applications for U.S. unemployment aid rose last week, but the number of Americans receiving benefits fell to more than a 45-year low, pointing to tightening labor market conditions.” Story at…

https://uk.reuters.com/article/us-usa-economy-unemployment/u-s-jobless-claims-rise-continuing-claims-lowest-in-over-45-years-idUKKCN1MZ1UC

 

MARKET REPORT / ANALYSIS         

-Thursday the S&P 500 rose about 1.9% to 2706.

-VIX dropped about 4% to 24.22. (This wasn’t a big drop for todays big day for stocks.  The Options Boys aren’t convinced the correction is over yet.)

-The yield on the 10-year Treasury rose to 3.123% as of 4:54 pm.

 

Raymond James had a piece years ago where they described a “selling stampede” as a 17 to 25-day period where the market falls nearly every day with occasional 1-1/2 to 3-day rallies before the stampede ends to the downside. That pretty well describes the current downturn that has lasted 24-days as of Thursday. The catch is we don’t know yet if the selling has ended.

 

Bottoms often have a few days of big back and forth moves, up and down, so we can’t really call a bottom here. For my analysis we would need a retest of the low, but we can say that it looks like we may have made a bottom based on the timing (as described in the Raymond James comment) and the near straight down move that sometimes is called a waterfall drop. This time there was a good bounce of about 2% in the middle of the drop, so we may not have had a pure waterfall event, but the number of days down is high enough for us to lean bullish. The odds are that we’ve made a short-term bottom, but we’ll need a retest to confirm it.

 

Today is trading day 25 for this pullback. The drop is now 7.7% (9.4% max). Over the last 10-years, for drops less than 10%, the average time from top to bottom has been 32-days to a final bottom, including a retest. (The low is usually at the retest.) Except for major crashes, the average correction was about 12% and lasted 53 trading-days including retests.

 

Today was a statistically-significant, up-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. If we can make another positive day tomorrow (Friday) I’ll feel better that we may have seen to lows or be near the lows.

 

As noted yesterday: My inclination is to take a conservative, protect the portfolio position and cut back on stocks. One can make a case for cutting stocks now or waiting for a bounce. The averages and technicals suggest that this correction is almost over so waiting seems reasonable. The other option, cutting stock holdings now, saves potential losses, but will be disappointing if the market continues to bounce up. Either way, without a successful test of the prior low, we can’t call an end to this retreat.

 

The S&P 500 is now 2.2% below the 200-dMA (2768). That will be a point of resistance.  Its possible the Index could claw back to prior highs, but who knows at this point. A 50% retracement is around 2800 so that would be another point we’ll watch. That is a bit below the 100-dMA (2825).

 

MOMENTUM ANALYSIS:

(Momentum analysis is not useful in a selloff. As an example, Proctor and Gamble was 16^th last week – now because of a flight to safety - it is #1.  If the downturn ends, it will drop quickly again.) 

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Neutral, but it showed an improvement in several categories of internals.

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 - HOLD

Thursday, the Price indicator was positive; Sentiment & Volume were neutral; the VIX indicator was negative. Overall this is a NEUTRAL indication.