“Filings for U.S. unemployment benefits unexpectedly fell
to a five-week low, even amid a partial federal government shutdown. Jobless
claims declined by 3,000 to 213,000 in the week ended Jan. 12…” Story at…
PHILADELPHIA FED (MarketWatch)
“The Philadelphia Fed manufacturing index rose
to a seasonally adjusted reading of 17 from a two-year low of 9.1 in the prior
month.” Story at…
CAREER ENDING DIVERGENCE (ZeroHedge)
“According to this data, investors have once again not
only not learned anything from the December shock, but are piling back into the
very same names that were the main culprits for the sharp fourth quarter swoon.
And, as one would expected, as money once again piles into the very same names,
another reversal could "mean trouble", according to Bernstein strategists
Sarah McCarthy and Inigo Fraser Jenkins. Why? Because the last time
momentum-stock valuations approached the sort of extremes seen in
2000, the strategy tumbled 53 percent in the following six months. Oh, and
the market crashed.” Story at…
SIGMA POINT CAPITAL EXCERPT (FinancialSense)
“…[a] continued downward trend in the global composite
PMI may indicate further weakness ahead for equities. I mentioned a few weeks
ago I would try and point out when the market rebounded enough for those who
wished to take some chips off the table to do so. Considering the voracity with
which the market has rebounded from the Dec. 24 low, now may be a good time to
initiate that process…the S&P 500 has risen back up to near the previous
support level (now resistance) that the market collapsed through in early
December. That resistance could prove formidable and may end up sending the
index lower in the near term.” - Sigma Point Capital. Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was up about 0.8% to 2636.
-VIX fell about 5% to 18.06.
-The yield on the 10-year Treasury rose to 2.753%.
My daily sum of 17 Indicators improved from +6 to +10 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +81 to +88.
Late day action was bullish as was the day’s action – up all
day - including a bump higher after there were reports that ending China tariffs
were on the negotiating table. The market retreated after its bum but still
headed higher.
The Index did mange to claw above its 50-dMA. The market
is getting stretched; but will the news allow the market to breakout and go
higher still? We’ll have to see what happens in the near term.
Repeating: 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%. (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 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).
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, the Sentiment
and Volume indicators were positive; The Price and VIX indicators were 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.
