"Index points to a moderation in economic growth in
September." This is the headline for this morning's
release of the Chicago Fed's National Activity Index…” Story at…
S&P 500 Q3 EARNINGS (FactSet, 19 October 2018)
“For Q3 2018 (with 17% of the companies in the S&P
500 reporting actual results to date), more companies are beating estimates
than average, but the magnitude of the beats is smaller than average. In terms
of earnings, more companies are reporting actual EPS above estimates (80%)
compared to the five-year average. In aggregate, companies are reporting
earnings that are 3.9% above the estimates, which is below the five-year
average. In terms of sales, more companies (64%) are reporting actual sales
above estimates compared to the five-year average. In aggregate, companies are
reporting sales that are 0.5% above estimates, which is below the five-year
average.” Earnings Insight at…
Here’s a good piece on portfolio management…
RISK OF A BIGGER CORRECTION (Real Investment Advice)
“Regardless of where the markets are trading, the time to begin reducing
risk is when the short-term overbought conditions return…the
preservation of capital during an ensuing market decline will provide a
permanent portfolio advantage going forward. The true power of
compounding is not found in “the winning,” but in the “not
losing.”
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 0.6% to 2740.
-VIX rose about 5% to 20.71.
-The yield on the 10-year Treasury slipped to 3.169% as
of 5:00pm.
Perhaps today was a moral victory. The S&P 500 didn’t win, but it recovered
a lot after its early morning bottom and made a run for a finish to the upside
only to dip in the last hour of trading.
Overall, my daily sum of 17 Indicators slipped from -4 to
-8 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dipped from -54 to -59.
At this point it seems to me that indicators are not
particularly important. We are watching
the chart to see if there will be a retest of the prior 2728 low. Today, the Index dropped below that level and
bounced up. Some would say that was a successful test. To convince me, we need
to see a successful test below the prior low at the close on lower volume.
We got a bearish second (successive) close below the 200-dMA
(2768) but, as I noted yesterday, it would be unfortunate to bail out of stocks
only to watch the markets turn around and go up after testing the prior low of
2728. So, I will wait for the retest and decide then.
Today is trading day 23 for this pullback. The drop is now 6.2%. Over the last 10-years,
for drops less than 10%, the average time from top to bottom has been 32-days.
Except for major crashes, the average correction was about 12% and lasted 53
trading-days.
MOMENTUM ANALYSIS:
(Momentum analysis is not useful in a selloff.)
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 switched
to Negative 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 - SELL
Tuesday, the Price
indicator was positive; Sentiment was neutral; Volume & VIX indicators were
negative. Overall this is a NEGATIVE indication that suggests reducing stock
allocations, but we are watching the charts and will examine the numbers if we
have a retest of the prior low.
