“Federal Reserve officials widely favored ending the
runoff of the central bank’s balance sheet this year while expressing
uncertainty over whether they would raise interest rates again in 2019, minutes
of their January meeting showed…’Many participants observed that if uncertainty
abated, the Committee would need to reassess the characterization of monetary
policy as ‘patient’ and might then use different statement language,’ the
minutes noted.” Story at…
BIG FOUR INDICATORS (Advisor Perspectives)
“There is…a general belief that there are four big
indicators that the [NBER Business Cycle Dating] committee weighs heavily in
their [recession] cycle identification process. They are: Nonfarm Employment;
Industrial Production; Real Retail Sales; Real Personal Income (excluding
Transfer Receipts)…Here is a percent-off-high chart based on an average of the
Big Four. The average of the four set a new all-time high in October of this
year. We extrapolate the figures that have yet to be released for the month to
determine whether we've hit another all-time high once that data is fully
released.” – Jill Mislinski.
Additional Charts and discussion at…
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“Even though this feels like a “blow off trading top” I
still do not think the December lows will be retested. The invaluable Lowry
Research Organization agrees as they wrote over the weekend (as paraphrased): Lowry
identified nine instances since 1940 when their Short Term Index expanded this
well from an oversold condition as it has since the December 2018 low. Seven
occurred when the S&P 500 was below its 200-DMA and were roughly coincident
with a new trend buy signal. The S&P 500 on average rallied some 35% over
the next 12 months and 55% over the next two years.” Commentary at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.2% to 2785.
-VIX dropped about 6% to 14.03.
-The yield on the 10-year Treasury rose to 2.645%.
My daily sum of 18 Indicators remained +6 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations dipped from +82 to +76.
Some short-term Indicators follow:
BEARISH
-The 20-dMA of late-day action continues 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.
-There have only been 5-down days in the last month and
that is bearish. If we get to only 4 down-days in the last month that would be
very bearish.
-The 10-day new-high/new-low indicator has topped and is
turning down.
-My sum of 18 indicators is falling suggesting some sort
of pullback (big or small – we don’t know)
-The Advance/Decline Ratio is overbought and has been for
some time.
NEUTRAL
-RSI was overbought yesterday, but it slipped today and
is now neutral.
-Bollinger Bands are elevated but neutral.
-The S&P 500 is in line with its internals and not
stretched.
-Sentiment is elevated but not in the red zone.
BULLISH
-The Index has broken above the 200-dMA. That’s a bullish
sign but I’m holding out for a trend-break indicator that says the Index must
get 3% above the trend line (in this case the 200-dMA).
-Up moves have been bigger than down moves over the last month.
-VIX is falling nicely.
-The short-term Fosback high-low Logic Index is bullish
today and is again giving a buy signal.
That is the only indicator that called the top of the correction to the
day.
-Cyclical Industrials are outperforming the S&P 500.
If investors were worried, cyclicals would be underperforming.
I’m reluctant to jump back in when markets are getting
very over-stretched. I hope to identify a better entry point to get back in the
market. The Index is now 1.4% above the 200-dMA.
A full retest seems unlikely 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.
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…
WEDNESDAY 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
Wednesday, the VIX
and PRICE indicators were positive. The SENTIMENT and VOLUME indicators were
neutral. Overall this is a POSITIVE/BULLISH indication. I remain defensive,
expecting some sort of pullback.
