“The NFIB Small Business Optimism Index fell to 107.4,
0.5 point below September’s reading. This is just below the highest reading in
index history. Thirty percent of business owners surveyed said the next three
months was a good time to expand, three points lower than last month’s reading.”
Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 slipped about 2% to 2722.
-VIX dipped about 2% to 20.02. (A lot of traders worry
when VIX gets over 20.)
-The yield on the 10-year Treasury dipped to 3.141% as of
4:59 pm Tuesday.
The S&P 500 was 1.4% below the 200-dMA at the close
today. During the Jan-Apr 9.9% pullback
the Index just barely got below the 200-dMA for one day at the bottom. So far
in the current pullback we have had over 3-weeks below the 200-dMA. To find a
correction where the Index did fall below its 200-dMA, I had to go back to Feb
of 2016. In that correction, the Index
bottomed 10.1% below its 200-dMA. If we
matched that stat from 2016 this time the S&P 500 would have to fall
another 10% or so. At this point, I doubt
that will happen. A big difference is
that the declining stocks were outpacing advancing stocks on a 150-day basis in
2016 and we are not there yet. It is worrisome, though.
My daily sum of 17 Indicators slipped slightly from +2 to
+1 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations improved from +13 to +21.
I must point out that most indicators are trend-following so the positive
indicators don’t make me feel particularly confident. As has been said many
times, “It is
difficult to make predictions, especially about the future.” - Karl
Kristian Steincke (also attributed to Yogi Berra and others.)
Today is trading day 38 for this pullback (counting from
the top). The drop from the top is now 7.1% (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. We can’t
say for certain that this correction is over unto the market makes new highs.
Given that the S&P 500 has dropped below its
trendline (going back 2-1/2 years) and closed below the 200-dMA on consecutive
days, I have a defensive stance now. If
we have a successful test of the prior low, and that could happen soon, I’ll be
right back in. On the other hand, since
we don’t really know where the bottom is, I am taking the conservative route.
This move may result in underperforming the S&P 500, but there is a risk
that declines may be more than we expect resulting in bigger losses.
It looks like there will be retest of the correction low.
We’ll have to see what happens when the S&P 500 tests that 2641 low.
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…
*Over the last 2-months the only ETF that is up is the
XLU (Utilities) and it is up about 1% over that time frame.
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 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 30% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio, but since I expect a retest of the recent
low I am taking a conservative stance. The problem is that we won’t know
whether this correction will go lower until we analyze data at the prior low. Even then, the data could be inconclusive.
INTERMEDIATE / LONG-TERM INDICATOR - HOLD
Tuesday, the Price
& Volume indicators were positive; Sentiment was neutral; the VIX indicator
was negative. Overall this is a NEUTRAL indication.
