“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…
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 16th 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…
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 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.
