EARNINGS INSIGHT EXCERPT (FACTSET)
“To date, 79% of the companies in the S&P 500 have
reported actual results for Q4 2018. In terms of earnings, the percentage of
companies reporting actual EPS above estimates (70%) is below the five-year
average. In aggregate, companies are reporting earnings that are 3.5% above the
estimates, which is also below the five-year average. In terms of revenues, the
percentage of companies reporting actual revenues above estimates (62%) is
above the five-year average. In aggregate, companies are reporting revenues
that are 1.1% above the estimates, which is also above the five-year average.”
Analysis at…
My cmt: Earnings are down, but revenues are up. Looks like the earnings-recession is
overblown.
FROM WALL OF WORRY TO SLOPE OF HOPE (MarketWatch)
“Sentiment conditions on Wall Street are flashing
short-term danger signs. That’s because the mood has shifted from the extreme
pessimism that prevailed in late December to nearly as extreme optimism today.
Some call current conditions a “slope of hope”…To
be sure, this does not mean that a decline back to the December lows is imminent.
Nevertheless, contrarian analysts are convinced that the sentiment winds are no
longer blowing in the direction of higher prices.” Story at…
My cmt: My sentiment numbers don’t agree. Mine are currently
neutral. Mine are not based on surveys; they are based on how less sophisticated
traders are betting in Rydex long/short funds.
CORRECTION UPDATE
This is day 102 of this correction (assuming we haven’t
made a bottom yet – I count top to bottom).
As of today’s close, the Index is down 5.2% (19.8% max) from its prior
all-time high and has included 21 new-lows. In recent years only the 2011
correction contained 21 new-lows. That correction bottomed at 19.4% on day 69
and successfully retested the low about 2% lower on day 108…It is looking more
likely that the 2018 correction ended at the low on 24 December, day 65. We’ll
see.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.2% to 2780.
-VIX dropped about 0.2% to 14.88.
-The yield on the 10-year Treasury slipped to 2.6638%.
Pros were selling again today (based on late day action).
There was a significant selloff in the last hour or so of trading as the S&P
500 gave up more than half of the gains for the day.
Longer term, the 20-dMA of late-day action has turned
down. That hasn’t happened since mid-December. It suggests the Pros are
beginning to doubt the rally can go higher without some sort of retracement or
consolidation.
My daily sum of 18 Indicators (added another indicator 2/19/2019
& backdated it from Jan 2018) slipped from +8 to +2 (a positive number is
bullish; negatives are bearish) while the 10-day smoothed version that negates
the daily fluctuations dipped from +84 to +82.
The Index has broken above the 200-dMA. That’s a bullish
sign since we’ve had more than 2 closes above the 200-day. I’m holding out for
the other trend-break indicator; the Index must get 3% above the trend line (in
this case the 200-dMA). I’m reluctant to
jump back in when markets are getting very over-stretched. I must begin to
consider it, however, given the relentless march upward. The Index is now 1.2%
above the 200-dMA.
A full retest seems less likely now, but it could still
happen. Only a retest at the 2351 level, or a climb back above the old highs,
will tell us whether 2351 was THE bottom.
I think we need to consider reentering the markets,
hopefully after a retreat of some kind.
My cautious sell-the-rally move (9 Jan) was based on the fact that every
correction greater than 15% in the last 50-years has retested the low. It
seemed like a no-brainer; now it looks like I have no brains! There was another
event that also had not happened in the last 50-years. Powell’s statement that the Fed “will be
patient” regarding future rate hikes on January 4, 2019 was an unprecedented
reversal of what he had said only a few weeks before. I mis-interpreted the importance
of his statement. I now think that the stunning “V” rally since 24 December is
due 100% to the Fed’s reversal. The market is now pricing in a greater likelihood
of a rate cut for 2019 when just a month ago we were looking at 3-hikes.
This change presents new challenges. If there is indeed a
slow-down large enough to bring a rate cut, it is not likely to be greeted
warmly by the markets since it would suggest the economy is in trouble. If
inflation picks up, a rate hike would also be a shock to markets. We live in
interesting times as one of the longest expansions in US history is
slowing. Will it enter recession? So far
no, but economists are notoriously bad at predicting recessions – or even
determining if we are already in one!
MOMENTUM ANALYSIS:
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…
TUESDAY 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).
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
Tuesday, the VIX
indicator was positive. The SENTIMENT, PRICE and VOLUME indicators were neutral. Overall this is a NEUTRAL
indication. I remain defensive looking of some sort of pullback.
