“The Empire State manufacturing index fell 12.4 points to
10.9 in December, the New York Fed said Monday. That’s
the weakest level in 19 months.” Story at…
My cmt: Any number greater than zero indicates expansion.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 1.1% to 2545.
-VIX rose about 13% to 24.52.
-The yield on the 10-year Treasury slipped to 2.895% as
of 4:58pm.
So, my bottom call of 2633 has proven to be too
optimistic. The technical-bottom did not hold as it was overcome by news. No
point in belaboring the point.
Today, the S&P 500 broke below the lower trendline going back to 2016 AND the closing low of 2582
for the Jan-Apr correction earlier in 2018. The test of that that level was unsuccessful.
Closing volume was higher than previous lows which is not a good sign for
ending a correction – we still could end tomorrow though. There were bottom
indications today:
-13% stocks advanced today on the NYSE. This is in the general range where we see a
bottom.
-Longer term, the 10 and 20-day moving average (20-dMA)
of stocks advancing on the NYSE are now below corrections going back to 2009
for which I have records handy. Today’s values were 35.1% and 42.4% for the
10-dMA and 20-dMA respectively. For reference, the numbers at the bottom of the
2010 correction (16%-drop) 37.7% and 48.4%. Markets are currently significantly
oversold. Unfortunately, oversold conditions can persist longer than one would
think.
-There were 884 stocks that made new-52-week lows
today. I had to go back to Jan 2016 to
find numbers lower; on that day the S&P 500 was less than 2% above the
final low of the correction that bottomed at 14% from its prior high.
-Comparing the number of stocks advancing vs the S&P
500 price, we see that the breadth is more bullish than the S&P 500 price
and the spread has reached a point that is a decent bottom signal, however,
this indicator is not exact and we may well see lower prices on the S&P 500
ahead.
-The S&P 500 is 7.7% below its 200-dMA. It is rare to
fall much below 7%. It has happened only 3-times in the last 7-years.
-Bollinger Bands are oversold; RSI hasn’t quite gotten to
negative territory yet.
My daily sum of 17 Indicators improved from -8 to -6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -10 to -21. Again, these are not good numbers.
We saw a Sell signal on the long-term NTSM system again
today. Unfortunately, this doesn’t make
a decision any easier now, because the long-term signal can flash sell at a
bottom. It first gave us the sell signal
on 11 October and that was the important signal. Too bad we got a Buy signal at
the retest – I’d be feeling a lot better had I not gotten back in.
This is day 60 of this correction. The Index is down 13.1% from its prior high. The
average correction over the last 10-years (excluding major crashes) lasted 52-days.
The average drop over that period was 12%. The longest correction in the last
10-years was the 19% drop in 2011. It took 108-days to complete, top to bottom.
It would seem that we are likely to see 2 closes below
the 2600 level and that would signal a trendline break. In addition, I wrote
yesterday that “…if the Index drops below the February lows (2582), I will be
out.” On reflection, I am not sure that is the best course at this point. It
appears we are close to a bottom, even though I don’t think we’re quite there
yet.
If I decide to cut stock holdings, I’ll post before 1100,
but at this point, it seems that we made a technical bottom already so a shift
to the upside is possible soon.
Bottom line: I don’t think this is a bear market. I think
it is a correction so I’ll plan to hang on longer. At my current position (60%
invested in stocks with 1/6 of that amount added when the market had fallen 10%)
I still have a significant amount of cash to buy stocks when we do see a bottom. Can’t get too worried, I think we bottom soon
unless the Fed screws it up this week with a bad message going forward.
MOMENTUM ANALYSIS:
(Momentum analysis is suspect in a selloff, so I‘d be
careful using momentum data for the time being – the only reason utilities are
highly ranked among ETFs is as an alternative to stocks during the correction.) The same is true for individual stocks in the
Dow 30.
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…
MONDAY 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 increased stock allocations to 60% invested in stocks
on 27 November. For me, fully invested is a balanced 50% stock portfolio so
this is slightly higher. I am considering reducing stock holding significantly,
based on the recent market action.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VIX and
Volume were negative; Price and Sentiment indicators were neutral. Overall this
is a NEGATIVE / SELL indication. The concern (as stated above) is that the
important sell-signal was last October. The NTSM long-term system can give sell
signals near a bottom too. For now, I am ignoring this indication.
