“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…
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…
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 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…
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.
