“While interest rates are expected to keep rising, there
is another view that Fed officials seem split about the actual path of interest
rate hikes. A few Fed officials have voiced that it may be necessary to
temporarily raise Fed Funds rates above their longer-run level. Others have
expressed that hiking above the neutral rate is not necessary without clear
signs of the economy overheating and without rising inflation.” Story at…
HOUSING (Reuters)
“U.S. homebuilding dropped more than expected in
September as construction activity in the South fell by the most in nearly
three years, likely held down by Hurricane Florence… Building permits declined
to their lowest level in almost 1-1/2 years and homebuilding completions were
the fewest since November 2017.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“A day after the oversensitive oil market yet again
demonstrated surprise at API’s estimate of
a 2.13-million-barrel crude oil inventory draw, the Energy Information
Administration’s official figures refuted that: the authority reported an increase
in U.S. commercial crude oil inventories of 6.5 million barrels for the week
ending October 12.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 slipped about 1pt to 2809.
-VIX dropped about 1% to 17.40.
-The yield on the 10-year Treasury rose slightly to 3.201%
as of 5:00pm.
We have resistance at the 100-day moving average (100-dMA
= 2825) and the 50-dMA (2873) so the S&P 500 may struggle to break thru
those levels. It’s really anyone’s guess where the Index will fail, or even if
it will fail. Retests of small drops are
always a question mark. A retest for a 6.9%
pullback is less likely than if this were a 15% pullback, but we may still see
a retest. Until we do, we don’t know if the pullback is over. Further, small retests send small signals, so
we may not be able to make a buy call even if we were to get a retest. Confused?
I’m just pointing out that the crystal ball is foggy for relatively small moves.
It took 15-days for the S&P 500 to drop 6.9% from the
prior top. Back in January it took 10-days to drop more than 6.9%. These are quick declines when we look back over
the last 8 years or so. Back in June of
2011 it took 30-days for a 7% fall. Thank-you Wall St. for computerized robo-trading!
We don’t have enough information to say whether this is good or bad for the
future of this pullback.
The Index remained 4.1% from its prior top.
Today the late day action (the Smart Money) turned back
down on a smoothed 10-day basis suggesting the Pros are selling.
Overall, my daily sum of 17 Indicators improved a bit,
from -7 to -6 (a positive number is bullish; negatives are bearish) while the
10-day smoothed version that negates the daily fluctuations actually slipped
from -49 to -54.
I am watching topping indicators to see if the Index get’s
out ahead of itself. So far, the indicators are not giving a strong signal. One
problem for the bulls is that the cyclical industrials (XLF-ETF) are underperforming
the S&P 500. Investors sell
cyclicals when they are worried.
We’ll continue watching. We can, however, be somewhat optimistic that the S&P 500 did not break significantly below the 200-dMA.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
to 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).
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 & VIX indicators were
negative. Overall this is a NEGATIVE indication that suggests reducing stock
allocations, but we are watching the S&P 500 to see if reducing
stock is the appropriate move, especially given the many unknowns.
