CONSTRUCTION SPENDING (Reuters)
“U.S. construction spending unexpectedly fell in December
as investment in both private and public projects dropped, further evidence the
economy lost momentum at the tail end of 2018…construction spending declined
0.6 percent..” Story at…
EARNINGS (FACTSET)
“To date, 96% 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 (69%) is below the five-year
average…In terms of revenues, the percentage of companies reporting actual
revenues above estimates (61%) is slightly above the five-year
average. …analysts predict a decline in earnings for the first quarter
(-3.2%) of 2019 and low single-digit growth in earnings for the second (0.3%)
and third (1.9%) quarters of 2019.” Analysis at…
CHARTS STILL IN A BEAR TREND (NorthmanTrader)
“The bull trend line is rising steeply and to recapture
the [bull] trend line will take more and more effort, especially a sustained
recapture. Hence March/April shall prove interesting and perhaps we’ll see
volatility make a comeback.”
Chart and commentary from Northman trader at…
Note: The chart shows Fibonacci retracement levels far
below the Christmas Eve low.
JEFFREY SAUT COMMENTARY EXCERPT (Raymond James)
“While I do not put much weight on it, there was a
short-term traders’ sell signal late last week when the 14-day Stochastic
Indicator crossed below its moving average. It is hard to argue with the
strength of this market and our indicators suggest two more weeks of upside
pressure with very small pullbacks, if at all. What I expect is a long steady
upside grind higher.” Full commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.4% to 2793. (The
Index was down over 1% at mid-day, but climbed all afternoon.)
-VIX rose about 8% to 14.63.
-The yield on the 10-year Treasury dropped to 2.724%
MACD crossed its signal line 3 days ago and that’s a sell
sign. The MACD (Moving average Convergence/Divergence) indicator is a
short-term oscillator that cycles from bull to bear frequently. It can give a lot of false sell signals. The indicator is best when confirmed by other
indicators. MACD has been bullish for 39 trading sessions. That’s a long time for this indicator. In addition, it is built on the 23-day
exponential moving average (23-dEMA) and the 12-dEMA. When those moving
averages exhibit a significant spread (as they do now) signals tend to be more
believable. The big spread; the length
of time since the last crossover bear signal and other indicators, make me
think the MACD sell-signal we see now is believable. The action suggests a top
to me.
Overall, my daily sum of 20 Indicators declined from +5
to zero (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from +72 to +62.
This is a mildly bearish indication.
Late-day action was bullish today, but longer term, the
Smart Money has been selling.
Levels of resistance on the way up are now points of
support. The Index is 1.6% above the
200-dMA and 5.5% above the 50-dMA.
A full retest of the Christmas Eve low seems unlikely
now, but it could still happen. Given
the length of time since the December low (more than 2 months) a drop to within
a couple of percent of the prior low would be close enough to be considered a
retest of the low and that’s a decent probability.
Only a retest at or near the 2351 level, or a climb back
above the old highs, will tell us whether 2351 was THE bottom. Financial data (LEI,
Philly FED, Durable Orders and Jobless Claims) were weak; numbers last week
were not much better. The economy is clearly in slowdown mode. One wonders whether
the markets can retake old highs any time soon – it looks doubtful to me.
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
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 and
PRICE indicators were positive. The VOLUME and SENTIMENT indicators were neutral.
Overall this is a POSITIVE/BULLISH indication. I remain defensive, expecting
some sort of pullback.
