“Data from the US released today, showed that the ISM
manufacturing index rose to 59.3 in November. According to analysts at Well
Fargo, the index gained amid stronger growth in new orders, backlogs and
employment.” Story at…
CONSTRUCTION SPENDING (MarketWatch)
“Public outlays on construction projects were 0.8% higher
than in September, while private sector spending was 0.4% lower. Both sectors
were higher compared to a year ago, public spending by 8.5% and private by
3.9%.” Story at…
PAUL DESMOND
I mentioned Friday that Lowry Research had written on the
subject of 90% volume days and that one occurred last week. That was a bullish
sign. The research paper was written by Paul Desmond who was President of Lowry
Research at the time. Paul received the
Charles H. Dow award for his paper on 90% volume days in 2002. The Charles H. Dow award is given annually and
it highlights outstanding research in stock market technical analysis. Paul
Desmond was a leader. I heard an
interview with him on technical analysis several years ago and I sat entranced
for two hours. He passed away in October. Rest in Peace Paul.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.1% to 2790.
-VIX dropped about 9% to 16.44.
-The yield on the 10-year Treasury was little changed 2.97%
as of 6.39pm.
The 5-10-20 Timer is once again positive. This simple market-timer system is bullish
when the 5-dEMA (day, exponential moving-average) and the 10-dEMA are above the
20-dEMA and bearish when they are below the 20-dEMA. It issued a sell on 9 Oct
at S&P 500 2880 and a Buy signal today at 2790. Just following this
indicator would have produced a gain of 3.2% based on the S&P 500 during
this correction. Not bad, although it has given a lot of false signals this
year and that makes it problematic. I like it as a BUY signal if other
indicators are slow to give a signal.
I noted the concern that tariffs might upset the apple
cart. The news was positive on the tariff
front as the US and China continue to work on issues. Trump postponed adding
more tariffs for the time being and that seems to be the impetus for today’s big
jump (I’m guilty of what I complained about last week!). We note that the mood
was already bullish due to the successful test of the prior low on Black Friday.
Today’s close is 1% above the 200-dMA and roughly half of
a percent above the 50-dMA. Good news! It
is still below the 100-dMA so we’ll be watching to see if it can break higher.
I think this rally will go higher, although as I write
this, futures are down a bit. Markets
don’t go up forever, we are due for a breather, but I think we will make new
highs.
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 S&P 500 has been outperforming Utilities
recently and that’s bullish for other ETFs – not Utilities (XLU).
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 improved
to POSITIVE 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 higher since we are coming off a bottom. I will cut back to 50% depending on indicators.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the Price indicator
was positive; Volume, VIX and Sentiment indicators were neutral. Overall this
is a NEUTRAL indication, but improvements to the numbers do support the belief
that the bottom was Friday, 23 November.
