MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 1.3% to 2671.
-VIX fell about 1% to 17.80.
-The yield on the 10-year Treasury was little changed at
2.786%.
Friday was a Statistically-Significant move up. That
means that the price-volume move exceeded my statistical parameters. Stats show that a down-day occurs about
60% of the time in the next trading day after a significant-up day. Significant up-days can
indicate tops. That would be expected now,
since the market is in the zone where we had expected a retreat to begin. That
zone is around the 50% retracement level and generally coincides with the
50-dMA. In fact, the S&P 500 is now 1.7% above its 50-dMA and has retraced
about 55% off the low. This is also at the upper trend-line, although the trend
line depends on the scales chosen for the charts used to graph the trend-lines.
We note some other bearish signals:
-The 150-dMA is still falling on the S&P 500.
-The overbought-oversold ratio is overbought.
-RSI is not quite overbought, but at 77 it is very close. 80 is overbought in my system. Bollinger
Bands are close to overbought, but are not there yet.
-My Money Trend indicator is still headed down and it
fell Friday even on the big bullish move up.
-New-highs are very low for what has been a huge move up over
the last 17 trading sessions.
My daily sum of 17 Indicators declined from +10 to +7 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations declined from +88 to +86.
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. (The Index is up about 3% since then.)
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
POSITIVE on the market.
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 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/intermediate version of this
indicator. The longer-term version is
neutral for Sentiment so longer term, the Indicator is Neutral.
