“U.S. services sector activity slowed to a six-month low
in January as businesses worried about the impact of a partial shutdown of the
federal government on the economy.” Story at…
SCHUMER-SAUNDERS BUYBACK LIMIT (CNBC)
“Senate Democratic leader Charles Schumer of New York and
Sen. Bernie Sanders of Vermont are calling
for legislation that would prevent companies from
buying back their own shares unless they first pay workers at least $15 an hour
and offer paid time off and health benefits.” Story at…
BULL TRAP RALLY (MarketWatch)
“…the familiar script during emerging bear markets: A
general sense of relief that the lows are in, and a return of optimism and
greed after an aggressive counter rally following an initial scary drop. Long
forgotten are the December lows after six weeks of higher prices. While indeed
a renewed fully dovish Fed may be all that’s needed to keep 2019 bullish (after
all, this playbook has worked for the past 10 years), there is evidence that
this rally may turn out to be a big, fat bull trap. And it’s not a single data
point, but rather a confluent set of factors that give credence to this
[bearish] possibility.” Commentary at…
My cmt: I tend to agree with this article – let’s hope it’s
not my confirmation bias at play. Bottom line though, my indicators are beginning
to suggest a reversal. I was early on this call though.
CORRECTION UPDATE
This is day 93 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 6.6% (19.8% max) from its prior
high and has included 21 new-lows. In recent years only the 2011 correction
contained 21 new-lows. That correction bottomed at 19.4% and took 108-days to
complete, top to bottom.
Over the last 20-years (excluding major crashes and the
current year) there have been 2 corrections that exceeded 19%, in 1998 and
2011. In 2011, the waterfall phase (nearly straight down with little or no
bounces) took place over 3-weeks (about 15-trading sessions) and included a 17%
drop with almost no relief. In 2018, the waterfall phase that ended Christmas
Eve lasted 3-weeks over 15-trading sessions and included a drop of 16%.
The Index is now only 0.1%
below its 200-dMA. The way it has powered up, one would guess it may continue
thru the 200-day. Whether it will remain there is questionable.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.5% to 2738.
-VIX fell about 1% to 15.57.
-The yield on the 10-year Treasury slipped to 2.700%.
The markets continue to power higher and that’s a
surprise to me. I thought the strong move up on 30 January would be a
short-term top. Oh well.
My daily sum of 17 Indicators improved from +7 to +11 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +63 to +73.
Some of the negative signs we had been watching switched
to positive. A couple of significant negative signs remain:
-Bollinger Bands and RSI that are both nearly negative,
but they are not there yet.
-Up-volume is still falling.
-The Index is getting ahead of the market internals,
though the trend of higher S&P 500 values without confirmation from
internals would have to continue before this indicator will turn negative.
-In the last month there have been only 5 down-days and
in recent years that has been a bearish sign. The markets won’t go up forever;
it just seems that way.
None of this is definitive, but the rally is looking
shaky; I expect a reversal soon, perhaps this week, but after today, next week
looks more likely.
Repeating what I’ve been saying for a while:
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:
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 Price,
Volume and VIX indicators were positive. The Sentiment indicator was neutral.
Overall this is a BULLISH indication.
