What do Hans Gruber and Franz Gruber have to do with
Christmas?
Ans. Hans Gruber was the criminal played by Alan Rickman
in the Christmas Eve attack on the Nakatomi Tower in the movie, “Die Hard.”
Franz Gruber wrote Silent Night.
JOBLESS CLAIMS (MarketWatch)
“The number of Americans applying for unemployment
benefits fell slightly in the week before Christmas, reflecting a vibrant U.S.
labor market and the very low number of layoffs taking place during the holiday
season. Initial jobless claims…slipped to 216,000 in the seven days ended Dec.
22…” Story at…
CONSUMER CONFIDENCE (Reuters)
“A measure of U.S. consumer confidence posted its
sharpest decline in more than three years in December, rattling investors
already nervous about the prospect that a global economic slowdown was spilling
over into the United States… the Conference Board on Thursday said its consumer
confidence index fell this month by 8.3 points to a reading of 136.4…” Story
at…
My cmt: Consumer Confidence generally mirrors the stock
market so lowered confidence should be no surprise. How to interpret it is a different matter.
Record holiday sales seem to indicate the consumer is in good shape.
MARGIN DEBT PREDICTES CRASH? (Advisor Perspectives)
Chart from…
My cmt: I don’t know. Therer have been many dips in
margin debt that coincided with corrections rather than crashes.
CORRECTION UPDATE
This is day 67 of this correction. As of today’s close, the Index is down 15.1%
(19.8% max) from its prior high. There have been 21 new-lows so far. Over the
last 10-years, and Outside of the Financial Crisis, that has only been matched
once. That was in the Oct 2011 correction that bottomed at 19.4%.
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.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was up about 0.9% to 2489.
-VIX fell about 1% to 29.96.
-The yield on the 10-year Treasury slipped to 2.776%.
Today’s market action was bullish. After a weak morning,
the Index climbed more than 3% after 2pm to finish up almost 1%. Market
internals went from freakishly bad to respectably good in a little more than an
hour.
My daily sum of 17 Indicators declined from 0 to -1 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations declined from -43 to -46. These are
small moves that can be ignored on a day like today.
Yesterday we saw a day with 96% up volume. Lowry Research
said the following about 90% up-volume days:
“In approximately half the cases in the past
69 years, the 90% Upside Day…which signaled a major market reversal, occurred
within five trading days or less of the market low.”
Yesterday’s 90% upside-day was 1-day after the market
low.
The low at the bottom of the waterfall phase of a
correction is usually at or near the final correction bottom, so I am I’m
cautiously optimistic. My guess is that this is like the 1998 19%-correction.
PEs were high and the economy was doing well. Like now, there were fears the
Bull market was coming to an end. The
Bull lasted a few more years. Here’s a quote from 1998:
“U.S. stock markets
continued their sharp decline Tuesday amid growing concerns over Asian economic
pressures and political uncertainty…” – CNN Money. Sounds familiar.
Still, we must be concerned about the possibility that
this is a bear market with more pain to come.
THE BOTTOM LINE: For me, any significant drop below
2350 must be sold with to a point with no more than 30% invested in stocks.
Only a retest at the 2350 level will tell us whether this
was THE bottom, but the bottom of the waterfall phase of a correction is
usually very close to the final bottom.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Neutral 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. A successful test
at the bottom (2350, S&P 500) should be bought with a very high level of
stock allocation.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, 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. I am ignoring this indication for the time being.
