“…a near-term pullback may just be in the cards given the
overbought condition of the stock market and the aforementioned divergences.
Surprisingly, however, my indicators continue to favor the upside despite the
potential for the mid-February “energy peak….[Lowry Research wrote]…’According
to the Lowry Analysis of the forces of Supply and Demand, the probabilities are
extremely low that the advance from the Dec. 24th 2018 bottom is a rally in a
bear market. In fact, since 1940, no bear market rally has shared the signs of
strength exhibited by the advance over the past seven weeks.’” Story at…
MARKET SUMMARY EXCERPT (THE FAT PITCH – FEB 9)
“SPX has now gained 16% since Christmas Eve…The
persistence of trend like this is typically followed by higher highs ahead.
Breadth reached another milestone this week, a condition which in the past 20
years has not occurred during a bear market and has not occurred
until after the correction low was already in. This adds further
evidence that Christmas probably marked the low for the recent swoon…Importantly,
the slope of the 200-d is flat, a condition which is unlike those during bear
markets; this is typically when SPX is best able to break higher.” Commentary
at…
STOCK MARKET RALLY ON HOLD (CNBC)
"Earnings are deteriorating even faster than we
expected," Wilson [Mike Wilson, Morgan Stanley chief equity strategist ] said
in a note on Monday. "The earnings revision breadth over the past month
has been even more negative than we [Morgan Stanley] expected leading us to
think [the] earnings recession trough in the U.S. could be later than 1Q and
deeper."
Story/commentary at…
My cmt: This is an interesting comment, especially given
that this is the minority view.
CORRECTION UPDATE
This is day 97 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 7.5% (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% on day 69; retested
the low about 25 lower on day 108.
The S&P 500 Index is
now 1.3% below its 200-dMA.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 0.1% to 2710.
-VIX rose about 2% to 15.97
-The yield on the 10-year Treasury rose to 2.663%.
My daily sum of 17 Indicators slipped from +3 to +8 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations rose from +89 to +93.
Up-volume is still falling, but not as steeply as it had
been; Money Trend is now flat and giving a neutral signal; and the 10-day
new-high/new-low data turned up. Behind the scenes, we’ve seen some improvement
over the last day or two – we’ll have to see if it continues.
No retest? That
seems to be the prevailing view of the experts based primarily on the rapid
improvement in Breadth and also on the 90% up-volume days after the low. I
measure breadth as the percentage of stocks advancing on the NYSE. Others use
Advance-Decline ratios or just a sum of advancers minus decliners. It doesn’t
matter how one measures it, breadth has been extraordinary since the Christmas
Eve low. At the low, breadth bottomed at 32% on a 10-day basis i.e., 32% of
stocks on the NYSE had advanced over the prior 10-days. Breadth peaked at 70% on 9 Jan, just 2-weeks
later. Breadth went from oversold to overbought in 4-days. We can compare this
to the 19% correction in 2011.
At the initial low of the 2011, it took nearly 2 weeks
for breadth to go from oversold to overbought.
At the retest, it only took 2-days to go from oversold to overbought. In
that regard, those who are saying “no retest” have a decent stat to support the
view. Two months after the retest low in 2011, there was a significant pullback
that made a higher low about 15% above the retest low.
It is still hard for me to accept that there will not be
a retest when we know that every correction greater than 15% in the last 50
years has retested the initial low. For
a retest, we’d need to retrace back to 2351, the previous low. Without a full
retest, a higher low is very likely and its value may not be much higher than
the current value of 2710.
Since Jan 9, breadth has been falling, so it appears we
may see some pullback, but perhaps not tomorrow. For the past several days, breadth has been
improving faster than the S&P 500.
We should see a positive day Tuesday just because there have been a majority
of stocks have been advancing on the NYSE, and eventually, the S&P 500
tends to follow the majority.
The S&P 500 is now 1.2% below its 200-day moving
average.
The key still looks like the 200-dMA. Can the S&P 500
power thru its 200-day as it has thru the other levels of resistance? I think
we’ll get above the 200-day, but perhaps fail to hold it. We should see at
least a 5% dip. Whether we’ll have a full retest remains to be seen. To me it
still seems more likely than not.
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved,
but 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
Monday, the VIX
indicator was positive. The Sentiment, Price and Volume indicators were
neutral. Overall this is a NEUTRAL indication.
