“Private sector employment increased by 271,000 jobs from
November to December according to the December ADP
National Employment Report®.” Story at…
JOBLESS CLAIMS (Reuters)
“The number of Americans filing applications for jobless
benefits tumbled to near a 49-year low last week, which could ease concerns
about a slowdown in the labor market and economy.” Story at…
ISM MANUFACTURING (FxStreet)
“The ISM Manufacturing Index dropped in December to the
lowest level in two years but remained above 50. James Knightley, Chief
International Economist at ING, point out that the decline in the ISM
Manufacturing index adds to the sense of unease about the outlook for the
global economy and reinforces the financial market gloom. It dropped from
59.3 in November to 54.1 – the steepest decline since 2008.” Story at…
JEREMY SIEGAL PREDICTS GOOD YEAR (CNBC)
“Despite the market's stumble into the new year,
Wharton's Jeremy Siegel is predicting solid gains for stocks by the end of
2019. The Wharton School finance professor is predicting between a 5 and 15
percent uptick and "quite a good year" for equity markets. "We
went from a rosy view to now, 'Oh, my god, there's going to be a
recession,'" Siegel told CNBC's " Squawk on the Street "
Wednesday. "The truth will be somewhere in between, and that leaves the
stock market very attractive now." Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped about 2.5% to 2448.
-VIX rose about 10% to 25.45.
-The yield on the 10-year Treasury dipped to 2.562%.
The Apple news weighed on the market, but a poor ISM
number also probably played a part in today’s drop. If there’s any good news,
it might be that volume was fairly low, about 12% below the monthly average.
That suggests this drop may not be as important as one might imagine. A panic
drop should be on higher volume.
My daily sum of 17 Indicators remained +3 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations improved from -16 to -6.
My Money Trend indicator continues up.
{This indicator attempts to follow the general concept of
Lowry
Research and their supply and demand methodology for stock market analysis.
Their concept is based on a detailed stock-by-stock analysis while mine is an
estimate based on readily available Macro data.
Theirs is much more accurate, but that doesn’t mean mine isn’t useful.}
The Fosback High/Low Logic Indicator gave a short-term
Buy signal on Friday. Today, it is still issuing a short-term buy signal. This
indicator was one of the few that issued a sell signal for this correction at
the top. See a discussion of the indicator in the Market Analysis section of
the blog here…
There are other oversold bottom indicators issuing buy
signs, but it all comes down to, “Is this a bear market?”
While I worry, we may be in a bear market, I lean toward
the optimistic side. Until proven otherwise, I think we’re in a correction.
Further, I think the correction has made its low, or very close to it. The
waterfall phase of the correction ended 24 December and that is usually the low
or within a couple % of the low. Still, we must be concerned about the
possibility that this is a bear market with much more pain to come since
selling could resume if a retest of the prior low is not successful.
Since we can’t say whether a retest of the low will be a
successful test or not, it is best to play conservative and sell the ongoing rally.
Selling should be in the range of 2560 –
2650. For further discussion on this subject see the Market Analysis in my blog
post…
Only a retest at the 2350 level will tell us whether 2350
was THE bottom. A retest is likely due to the low volume we saw at the low
before Christmas. One might think the
low volume was due to the Holiday, but we have seen low-volume days like this
during corrections that weren’t around a holiday.
THE BOTTOM LINE: For me, any significant drop below
2350 must be sold to a point with no more than 30% invested in stocks.
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%. (In this case -100%
since all are negative.) 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; unfortunately, those bottoms didn’t hold. For me, fully invested is a balanced 50% stock portfolio so this is higher.
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; unfortunately, those bottoms didn’t hold. For me, fully invested is a balanced 50% stock portfolio so this is higher.
INTERMEDIATE / LONG-TERM INDICATOR
Thursday, the
Sentiment indicator was positive; VIX and Volume indicators were negative;
Price was neutral. Overall this is a NEUTRAL indication.
