“Stocks plummeted through lows of the year and investors
flocked to bonds after the Fed failed to sound like it was easing off its
tighter policy path as much as markets had expected. The Fed raised interest
rates by a quarter point, as expected, and lowered its median rate forecast to
two hikes from three next year.” Story at…
EXISTING HOME SALES (Reuters)
“U.S. home sales unexpectedly rose in November, but
recorded their biggest annual decline in 7-1/2 years [on a year-over-year basis]
as the housing market remained mired in weakness amid higher mortgage rates
which have made home purchases more expensive.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“Amid plunging oil prices pressured by the double weight
of U.S. production and global economic growth projections, the Energy
Information Administration
reported a
crude oil inventory draw of 500,000 barrels for the week to December 14, after
a weekly draw of 1.2
million barrels a week earlier.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 1.5% to 2507.
-VIX was unchanged at 25.58.
-The yield on the 10-year Treasury slipped to 2.782%.
My daily sum of 17 Indicators improved from -7 to -5 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -35 to -40. RSI and Bollinger Bands both switched to
oversold, a buy indication, and that’s why there was a slight improvement in
the daily numbers. Every overbought/oversold indicator I have is now oversold.
This is day 62 of this correction. The Index is down 14.5% 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. Now to discuss this mess…
Let me get this straight…the S&P 500 dropped over
1.5% today and the VIX was unchanged? I
know it’s options expiration this week, but this still seems really odd. The Options
Boys are as confused as I am! Let’s review.
The FED did exactly what I expected. They raised rates – it was widely expected – and
said they expect to raise rates only twice next year instead of three times as
had been previously telegraphed. That seems like good news. Apparently, that wasn’t what everyone else expected;
the markets wanted more and we saw a drop in the S&P 500 from 2575 before
2PM (when FED minutes were released) down to 2490 before closing higher. That’s
a drop of 3% on reasonably good (but apparently not good enough) news.
To make matters more confusing, we made a technical bottom
Tuesday and the market had been up more than 1% before the FED meeting.
Inexplicably, the FED announcement seems to have been a major surprise.
I said yesterday I thought we made a bottom at 2546. Now,
the only advice I have is to wait for cooler heads to step in over the next day
or two to give us some idea what the bleep is going on.
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…
WEDNESDAY 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. I bumped up stock investments to 65% on 19 December. Both increases
were made at technical bottoms or shortly thereafter. For me, fully invested is
a balanced 50% stock portfolio so this is higher. The failure of technical bottoms has been disappointing.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the VIX and
Volume indicators were negative; Price and Sentiment were neutral. Overall this
is a NEGATIVE / SELL indication. The concern is that the important sell-signal
was last October. The NTSM long-term system can give sell signals near a bottom
too. For the next day or two, I am ignoring this indication.
