“New applications for U.S. unemployment benefits dropped
last week and the number of Americans on jobless rolls fell back to levels last
seen in 1973, suggesting a further tightening in labor market
conditions…Initial claims for state unemployment benefits decreased 5,000 to a
seasonally adjusted 210,000 for the week ended Oct. 13…” Story at…
PHILADELPHIA FED (MarketWatch)
“The Philadelphia Fed manufacturing index fell slightly
to 22.2 in October from 22.9 in September, the regional district of the central bank said
Thursday...Any reading above zero indicates improving conditions.”
Story at…
LEI (Conference Board)
“The US LEI improved further in September, suggesting the
US business cycle remains on a strong growth trajectory heading into 2019.
However, the LEI’s growth has slowed somewhat in recent months, suggesting the
economy may be facing capacity constraints and increasingly tight labor
markets,” said Ataman Ozyildirim, Director and Global Research Chair at The
Conference Board. “Economic growth could exceed 3.5 percent in the second
half of 2018, but, unless the momentum in housing, orders and stock prices
accelerates, that pace is unlikely to be sustained in 2019.” Press release at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped about 1.4% to 2769.
-VIX jumped about 15% to 20.06.
-The yield on the 10-year Treasury dipped to 3.182% as of
5:00pm.
While volumes have been generally climbing, we note that
today’s volume wasn’t particularly high – it was actually about 1% below the
monthly average. Selling was up, but volume was down. There was a lot less
selling pressure than we saw a week ago based on volume.
My Money Trend indicator turned up today, also indicating
less selling pressure. This indicator attempts to follow the general concept of
Lowry
Research and their supply and demand methodology for stock market analysis.
Their concept is based on a detailed stock-by-stock analysis while mine is an
estimate based on readily available Macro data.
Theirs is much more accurate, but that doesn’t mean mine isn’t useful.
The S&P 500 has still not closed significantly below its
200-dMA. The 200-dMA is 2768 as of Thursday.
RSI and the Overbought/Oversold ratio are indicating
oversold. There have only been 5-days up
in the last month for the S&P 500.
That’s a strong oversold sign too. (I looked all the way back to 2009
and couldn’t find a number this low.) New-High/new-low data doesn’t get much
worse than we have now. Seems like it has nowhere to go but up.
The Index is now 5.5% from its prior top.
Late-day-action (the Smart Money) is in a negative zone
that has not been exceeded in the last 6-years (as far back as I have kept this
indicator). This is a point seen at bottoms.
Overall, my daily sum of 17 Indicators remained unchanged
at -6 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations slipped from -54 to -56.
The Breadth topping indicator is headed up showing that NYSE
breadth (number of advancing stocks) are improving faster than the S&P 500.
So far this indicator would need to improve a whole lot more before it would
get positive on the market. Now it’s neutral, but at least it is improving.
It is difficult to sit back and watch these wild gyrations
in the markets, but we still seem to be closer to a bottom than the top. With
that in mind I can’t recommend selling stocks unless the S&P 500 breaks
convincingly below the 200-dMA. The conventional wisdom is that it takes 2 successive
closes below trend or a close 3% below trend to indicate a change in trend. We
are considering the 200-dMA as trend and so far, the trend remains up.
With that said, it is up to each investor to decide on
comfort zones for how much stock to hold.
Are you losing sleep? Worried about the money in the stock market you’ll
need next year? Worried about your retirement? By all means, reduce stock
allocations to your comfort level. My current stock allocation is conservative
(see below in paragraph, Current Market Position). While the indicators suggest
that this pullback is not as bad as the TV prognosticators would have us
believe, keep in mind that no analysis is perfect and even the best indicator
is often wrong.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Thursday, 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 moves in the S&P 500 to see if reducing
stock is the most advantageous move.
