"An incomplete look at U.S. productivity in the final
three months of 2018 showed a 1.3% increase in the manufacturing sector, up
from 1.1% in the third quarter.” Story at…
CRUDE OIL INVENTORIES (OilPrice.com)
“A day after the American Petroleum Institute
disappointed oil bulls by reporting an estimated inventory build across the
board, the Energy Information Administration deepened the
mood by saying U.S. crude oil inventories added 1.3 million barrels in the week
to February 1.” Story at…
WE’RE ARGUING OVER 200 MILES OF “WALL” (US News)
“Trump has made it clear that the centerpiece of this
funding would be for "the wall." Homeland Security officials
have been more specific on how they would use the money: to
replace 115 miles of border fence and build an additional 100 miles of new
barriers.” Story at…
CORRECTION UPDATE
This is day 94 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 6.8% (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%. Both the 1998 and 2011 corrections included a
retest of the low as have all corrections greater than 15% in the last
50-years.
The S&P 500 Index is
now 0.4% below its 200-dMA.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dipped about 0.2% to 2732.
-VIX fell about 1% to 15.38.
-The yield on the 10-year Treasury slipped to 2.694%.
My daily sum of 17 Indicators improved from +11 to +12 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +73 to +84.
While some of the negative signs we had been watching
switched to positive, we see that a lot of indicators have stalled and are
nearly directionless. The conclusion
here is that the slight improvement in the indicators is not worth much, because
some of these indicators are flopping back and forth.
The key now looks like the 200-dMA. Can the S&P 500
power thru its 200-day as it has thru the other levels of resistance? It hasn’t
yet, but that doesn’t mean much. The Index will need to test the 200-day
repeatedly before we’ll know.
The most powerful bullish signal I see is in the VIX. VIX
is now falling sharply and signaling ‘buy”. The Options Boys are leaning
bullish.
My long to intermediate term indicator has been “Buy”
since 7 January (2550 – S&P). I have ignored it because in the last
50-years, every correction greater than 15% has had a retest. In this case, that would take the Index down
to 2351. Will this be the only correction that doesn’t include a retest? I
think not, but we’ll see.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
to POSITIVE on the market. (The reading is not very strong since some charts of
the indicators are very nearly flat, i.e., the signals are not strong.)
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 Price,
Volume and VIX indicators were positive. The Sentiment indicator was neutral.
Overall this is a BULLISH indication.
