CONSUMER CONFIDENCE (FxStreet)
“Consumer sentiment slipped
in early October, although it remained at quite favorable levels and just above
the average reading during 2018 (98.5)," the University of Michigan's
Surveys of Consumers chief economist, Richard Curtin, said.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.4% to 2767.
-VIX dropped about 15% to 21.31.
-The yield on the 10-year Treasury rose to 3.162%.
Friday, the S&P 500 closed 1 point above the 200-dMA and that’s a
good sign. There are so many signs that the markets are significantly oversold
that a bounce up looks like the most likely move next week. Friday’s trading
included a good late-day, move-up that indicates the Pros are suddenly more
bullish.
Friday was a statistically-significant, up-day. That just
means that the price-volume move up exceeded statistical parameters that I
track. The stats show that about 60% of the time a statistically significant
move up will be followed by a down-day the next day. For this pullback, a key
sign will be what happens Monday. Since a down day is more likely, an up-day
would confirm that selling pressure has been greatly reduced.
At the recent top, on 20 Sept, Sentiment was 85%-Bulls. (Sentiment
is measured by the amounts invested in Rydex long/short funds.) 16 trading-days
later, with the markets down 5.6%, sentiment was 86%-bulls. While my sentiment
indicator won’t be negative until sentiment reaches 92%, the lack of any
retreat in sentiment with this level of market unrest shows a high level of complacency.
I thought I’d check Trin (Traders Index) to see if it is
giving any strong signals that might tell us if Thursday was a bottom. The
answer was inconclusive. Trin was 1.3 Thursday, not high enough to suggest a
bottom; but not low enough to say it wasn’t a bottom.
Some Bottom signs:
-RSI, Bollinger Bands and the Overbought/Oversold Ratio
are all giving oversold indications.
-Breadth (% of stocks that advanced over the last 10-days
or 20-days) are at values lower than the bottom of nearly every correction after
2009.
More Bearish Signs:
-The 5-10-20 Timer system is a sell. (This is a simple
crossover system that is a “sell” when the 5-dMA and 10-dMA’s are below the
20-dMA.)
-Late day action (the Smart Money) continues down.
-Money Trend is falling sharply.
-VIX is bearish.
Overall, my daily sum of 17 Indicators slipped from -6 to
-9 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations actually improved from -42
to -44.
The intermediate/long-term indicator remains SELL, but for
me, the important stat is that the S&P 500 did not close below its 200-dMA
Friday. We need the Index fall below the 200-day to confirm the indicators. Until
it does, the uptrend remains intact. I might change my mind if the market
bounces significantly higher while the indicators remain negative.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Friday, the Sentiment
and Price indicators were neutral; Volume & VIX indicators were negative.
Overall this is a NEGATIVE indication that suggests reducing stock allocations.
I am watching the S&P 500 and its 200 day moving average to decide whether or not to reduce stock allocations.
