“The number of people who applied for jobless benefits in
late January soared to a 16-month high of 253,000, but the spike stemmed mostly
from seasonal quirks that occur around the holidays and are likely to fade
soon.” Story at…
CHICAGO PMI (Advisor Perspectives)
“The latest Chicago Purchasing Manager's Index, or the
Chicago Business Barometer, fell to 56.7 in January from a revised 63.8 in December…‘The
MNI Chicago Business Barometer had a sluggish start to 2019, pressured by
significant drops in both New Orders and Production, resulting in the lowest
headline reading in two years,’ Jai Lakhani, Economist at MNI Indicators, said.’”
Commentary and charts at…
NEW HOME SALES (MarketWatch)
“New-home sales ran at a seasonally adjusted annual
657,000 rate in November, the Commerce
Department said Thursday. That was 17% higher than
October’s sales pace and marked an 8-month high.” Story at…
CORRECTION UPDATE
This is day 90 of this correction (assuming we haven’t
made a bottom yet – I count top to bottom).
As of today’s close, the Index is down 7.7% (19.8% max) from its prior
high and has included 21 new-lows. In recent years only the 2011 correction contained
21 new-lows. That correction bottomed at 19.4% and took 108-days to complete,
top to bottom.
Over the last 20-years (excluding major crashes and the
current year) there have been 2 corrections that exceeded 19%, in 1998 and
2011. In 2011, the waterfall phase (nearly straight down with little or no
bounces) took place over 3-weeks (about 15-trading sessions) and included a 17%
drop with almost no relief. In 2018, the waterfall phase that ended Christmas
Eve lasted 3-weeks over 15-trading sessions and included a drop of 16%.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.9% to 2704.
-VIX fell about 6% to 16.57.
-The yield on the 10-year Treasury rose to 2.637%.
While I have been calling for a retest of the 2351 low for
what seems like forever, one must wonder whether this will be the one-in-20
event where there is no retest. Investors now seem to be in full “fear-of-missing-out,
buy-buy-buy” mode. Indicators are bullish.
My daily sum of 17 Indicators remained +12 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations improved from +56 to +62.
Today, the S&P 500 remained above its upper downtrend
line - that’s the line extending back to 3 Oct 2018 - and that should indicate
a trend reversal, ie., “Everything is under control. Situation normal. Had a
slight weapons malfunction. But uh, everything is perfectly alright now. We're
fine. We're all fine here now, thank you. How are you?" Well, since you
asked, sometimes an investor must hold his/her nose and buy. Is this that time?
I think not; at least not yet.
I said that the close at 2671 was probably a short-term top.
We got slightly higher yesterday and higher still today. So much for being
right – I haven’t been. We still need to see at least a small pullback based on
the Statistically-Significant up-days we saw recently. The 50-year history of
correction data that I presented in yesterday’s blog indicates that the bounce from
the waterfall low can sometimes retrace the entire waterfall drop. Maybe that’s
where we are headed now. That would take the Index back to 2790. That’s
possible, but it is more likely that the Index will have a hard time breaking
thru the 200-dMA, now at 2741. That’s less than 2% higher from where we are
now.
Repeating what I’ve been saying for a while:
A “V”-bottom is very unusual and I don’t think it is
likely that this correction will race to a top without a retest of the prior
low at 2351. I sold the rally and cut my stock holdings back to about 30%, 9 January
to reduce risk. Only a retest at the 2351 level, or a climb back above the old
highs (not likely without a retest), will tell us whether 2351 was THE 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 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).
My current stock allocation is about 30% invested in
stocks on as of 9 January 2019. For me, fully invested is a balanced 50% stock
portfolio so this is a very conservative position.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, Volume
and Price indicators were positive. The VIX and Sentiment indicators were neutral.
Overall this is a BULLISH indication.
