“Though seasonality favors a year-end rally, with the
long-term MACD (a monthly trend/momentum indicator) for the S&P
500 now making a bearish crossover, this lowers the probability of a quick
rebound to higher highs above the October 3rd peak. More than likely,
we are setting up for volatile sideways trading or further downside should
fundamentals deteriorate.” – Chris Sheridan. Commentary at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.7% to 2633.
-VIX rose about 3% to 21.52.
-The yield on the 10-year Treasury was little changed at
3.040%.
Volume was less than half of the monthly average today as
is to be expected for Black Friday.
Correction Update:
The S&P 500 made a new low in this correction
Friday. Volume was low, but we can infer
it was low due to the Holiday and not reduced selling pressure. Only 31% of the
volume was up-volume today. At the prior low 40% of the volume was up-volume so
we are inclined to conclude that there was more selling pressure today than at the
prior low, albeit on much lower overall volume. Regardless, we didn’t see
positive divergences that would have allowed us to call a bottom so we’ll have
to wait for further testing at this level (now S&P 500 = 2633) before we’ll
have a chance to call an end to the correction (assuming the signals line up).
Today is trading day 45 for this pullback (counting from
the top). The drop from the top is now 10.2% (10.2% max so far). These numbers
are based on closing data. Over the last 10-years, the average correction was
about 12% and lasted 53 trading-days including retests (excluding major crashes).
The most likely course remains that there will be another
retest of the correction low. We’ll have to see what happens if and when the
S&P 500 tests around the 2633 low again.
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
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 30% invested in stocks. For me, fully invested
is a balanced 50% stock portfolio.
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 even bigger losses if I had stayed fully invested.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the Price
indicator was positive; the Sentiment indicator was neutral; the Volume and VIX
indicators were negative. Overall this is a NEGATIVE indication. This would be
a Sell indication, but it’s probably too late to sell now - unfortunately, I
don’t know how far this pullback will go. The first (and important) sell signal of this
corrective cycle by this indicator was on 11 October.)
