“For the year to date, starts are 5.1% higher than in the
same period last year. Housing starts ran at seasonally adjusted annual 1.256
million rate in November, the
Commerce Department said Tuesday.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 remained unchanged at 2545.
-VIX rose about 4% to 25.58.
-The yield on the 10-year Treasury slipped to 2.816% as
of 5:06pm.
Today we tested the recent bottom of 2545 and the test
was successful. Every category of market
internals that we use was positive at the test…once again, I am calling a
bottom and correction over. Any one who
has read this blog recently knows I called the bottom at 2633 around
Thanksgiving Holiday and that was retested 7 December. That one didn’t hold. This time the numbers are broader and, in
some ways, more optimistic. It looks like correction over to me…again. Will we
be right this time? Only time will tell.
Some of the standard bottom indicators are now in place
or close, too. Bollinger Bands were
oversold yesterday; RSI was 33 today (30 is oversold in my system); XLI-ETF (Industrial
cyclicals) is still underperforming the S&P 500, but it is rapidly improving;
the Overbought/Oversold Index is oversold as is my late-day oversold indicator (This
one is oversold very infrequently.); unchanged volume was exceptionally high today
and that sometimes happens at direction changes; and finally, the S&P 500 minus
the XLU-ETF (Utilities) spread bottomed 2-days ago. Investors have been selling
utilities over the last 3-days.
My daily sum of 17 Indicators declined from -6 to -7 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from -21 to -35. These are not good numbers, but I think the
bottom data we have today over-rules these numbers.
We saw a Sell signal on the long-term NTSM system again
today. The long-term signal can flash
sell at a bottom so I’ll ignore it for now.
It first gave us the sell signal on 11 October and that was the important
signal.
This is day 61 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.
Bottom line: I think the correction has made a bottom. At
my current position (60% invested in stocks; 1/6 of that amount was added when
the market had fallen 10%) I have a significant amount of cash on hand. If I am right, we should see a big bounce
tomorrow (like we saw at the last bottom call) because I’m using tried and true
methods that the Wall Street boys know better than I do. That should give us
the sign to join in and increase the % invested in stocks. I expect to be buying tomorrow and I’ll bump
the % of stock holdings to 70%. I might even buy Intel again.
What could go wrong this week? The Fed could screw it up
with a bad message on the future, but I don’t expect it.
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…
TUESDAY 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
Tuesday, the VIX
and Volume indicators were negative; Price and Sentiment 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.
