“Falling gasoline prices curbed inflation at the end of
2018…The consumer price index slipped 0.1% in December to mark the first
decline in nine months…Another closely watched measure of inflation that strips
out food and energy, known as the core rate, rose 0.2% last month.” Story at…https://www.marketwatch.com/story/consumer-inflation-falls-for-first-time-in-nine-months-due-to-lower-gas-prices-cpi-shows-2019-01-11
FOURTH QUARTER GUIDANCE (FACTSET)
“…the earnings guidance issued by S&P 500 companies
for Q4 has been slightly more positive than average, while revenue guidance
issued by S&P 500 companies for Q4 has been slightly more negative than
average.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about a point to 2596.
-VIX dropped about 7% to 18.19.
-The yield on the 10-year Treasury dipped to 2.702%.
My daily sum of 17 Indicators improved from +10 to +12 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +57 to +69.
The 10-dMA of the % of stocks advancing on the NYSE improved
very slightly today. The 10-dMA of up-volume was down slightly. The spread
(new-highs minus new-lows) got worse on a 10-day basis, but it has improved a
bit in the last day or two. Spreads between utilities and cyclicals vs the S&P
500 are improving. The biggest issue in the Internals data today was a very
high un-changed volume which suggests investor confusion and can sometimes indicate
a change in market direction. With that in mind (along with other evidence), we
expect the ongoing rally off the lows to stall next week, if it hasn’t already
made a top.
Since a retest of the prior low at 2351 is likely, I sold
the rally and cut my stock holdings back to about 30%, 9 January. I did this to reduce risk. There is a possibility that this “correction”
could be the bear market crash some have been anticipating for several years. The
issue us simple: 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.
THE BOTTOM LINE: I’ve cut stock holdings to about 30% of
the overall portfolio. If one chooses not to sell, keep in mind that a
significant drop below 2350 (3% or more) could be the beginning of a further
drop that could take the markets down drastically.
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…
FRIDAY 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
Friday, the Sentiment,
VIX and Volume indicators were positive; The Price indicator was neutral.
Overall this is a POSITIVE indication, BUT IT MAY BE TOO EARLY to Buy now since
we expect a retest of the low. It does
indicate that conditions have greatly improved. Bullish Sentiment is based on
the short-term version of this indicator.
The longer-term version is neutral for Sentiment.
