“Labor markets tightened across the United States as
businesses struggled to find workers at any skill level and wages generally
grew moderately, the Federal Reserve said on Wednesday in its latest report on
the economy…The Fed reported that outlooks for the economy were generally
positive, but added that many districts said contacts were less optimistic due
to increased financial market volatility, rising short-term interest rates,
falling energy prices, and elevated trade and political uncertainty.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“The Energy Information Administration reported a
crude oil inventory decline of 2.7 million barrels for the week to January 11
but the report failed to have any palpable effect on oil prices. Inventories
are about 8 percent above the five-year average for the season.” Story at…
DOUBLE DIP CORRECTION (RETEST) (Financial Sense)
“Piper Jaffray’s Senior Technical Strategist Craig
“Bullseye” Johnson, who accurately predicted the late-2018 correction…says the
December 2018 low was a great buying opportunity and that we are now experiencing
a “relief rally” that, he believes, will ultimately give way to another
correction and double-bottom low. Craig does not think this is the end of the
bull market however and explains the areas he’s looking to buy…” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.2% to 2616.
-VIX rose about 2% to 19.04.
-The yield on the 10-year Treasury rose to 2.724%.
Looking only at today’s internals data, one would have a
fairly positive view of the market. 63.6% of stocks on the NYSE have gone up (a
measure of Breadth) and 63.8% of the total volume has been advancing volume
over the last 10-days. New-high, new-low data has improved too. These are
bullish signs, but not all is as good as it looks.
Breadth is actually so high, it is now a negative since
the overbought/oversold ratio is “oversold.” Both Breadth and Up-volume peaked
a week ago and a plot of the 10-dMA would show them falling. Markets usually
follow these internals; this just indicates that markets don’t go up forever
and a pull-back of some sort is suggested in the near term. VIX has been somewhat high over this rally. I
would have expected the VIX to fall faster than it has and that may be a sign
that the Options Boys aren’t quite buying into the rally.
My measure of Money Trend is falling after making an
all-time high (based on 8-years of data) and that’s a bearish sign.
RSI, (SMA-14) dropped back to neutral today at 74. Bollinger Bands are not yet bearish.
My daily sum of 17 Indicators was unchanged at +6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +78 to +81.
Late day action was bearish as there was a sell-off that
gave up most of the day’s gains. We also saw high unchanged-volume that can sometimes
indicate a turning point for markets.
Utilities (XLU-ETF) are again outperforming the S&P
500 on a longer-term basis. That’s a
bearish switch, because investors were selling utilities not long ago – investors would still be
selling utilities if they thought the correction was over.
It seems like we have bearish signs, still the crystal
ball is not clear. As I wrote previously, the end of the rally will likely be
signaled by a big up-day (1.5% or more) as shorts throw in the towel and cover
their losing bets. That should be the
short-term top and it may occur soon, especially if we push higher than the
zone of resistance, around the 50-dMA of 2629.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained NEUTRAL on the market. (Up-volume has been slipping on a smoothed
10-day basis.)
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
Wednesday, 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.
