HOME SALES (USAToday)
“U.S. home sales soared 11.8 percent in February, aided
by accelerating wages and falling mortgage rates that are improving
affordability. The National Association of Realtors said Friday that existing
homes sold at a seasonally adjusted annual rate of 5.51 million last month, a
decisively sharp rebound from a pace of 4.94 million in January.” Story at…
STOCKS TUMBLE (CNBC)
"The major averages ended trading deep in the
red as mounting worries around slowing global growth and a potential
recession gripped Wall Street. The S&P 500 saw its
worst daily performance in two months. Experts are split on what investors
should do next, and a lot of the unknowns depend on the Trump administration’s
policy moves over the next few months, they tell CNBC." Story at...
WHAT YIELD INVERSION MEANS (MarketWatch)
“An unusual event occurred today. The yield on the
10-year Treasury bond fell below the yield on a 90-day Treasury bill. This is
called a yield curve “inversion”… When the yield curve inverts, it’s because investors think that
a recession is coming…The economy is entering
dangerous territory…The inversion of the yield curve today is yet another
reminder that nothing, not even impressive economic growth and 3.8%
unemployment, lasts forever." Story at...
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 1.9% to 2801.
-VIX jumped about 21% to 16.48.
-The yield on the 10-year Treasury dropped to 2.442%.
While Indicators looked bullish yesterday, the chart
looked suspicious, especially because we had seen large multiple back-and-forth,
up-and-down days over the last 3-weeks. It bothered me enough to change my mind
Thursday night and stay out of the markets a bit longer. Those big-days are
what I call “statistically significant.” Friday was another statistically-significant
day, though this one was down. That just means that the price-volume move
exceeded my statistical parameters. Statistics show that a statistically-significant
down-day is followed by an up-day about 60% of the time. Same as yesterday, there
have been 5 statistically significant moves in the last 3-weeks of trading
sessions. That usually happens at a top
or a bottom.
We saw a bit of panic selling today based on the size of
the move relative to the recent calm in the market; however, volumes were not
extreme, only about 10% above the normal for the past month.
Late-day action was quite bearish; the Index fell almost
1% in the last hour of trading. Oddly, the signal is confused by a positive
closing tick. Closing tick (last trades of the day) was +223. Looking at the
chart, one wonders if the data is correct.
The close today broke support in the 2810 to 2030 range
which raises concern about the rally. The Index is now 1.6% above the 200-dMA.
My daily sum of 20 Indicators improved from +8 to +2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +43 to +51. Most of
these indicators are short-term. The NTSM long-term indicator dropped from Bullish
to Neutral.
The fact that the FED no longer intends to raise rates
this year, combined with their stated plan to end balance sheet reduction in
September is concerning. The FED Balance Sheet will then be 4-times higher than
where it was during the Financial Crisis. What do they know that we don’t?
I plan to continue watching the markets. We haven’t seen
very many topping signals that would convince me the market has topped, but Friday’s
action was bearish.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
POSITIVE 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. I’ll be moving to a balanced 50% stock portfolio
Friday. Stay conservative; this market is fragile and could turn down quickly
if we have bad news that triggers a shift to risk aversion.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the PRICE, were
positive. The VOLUME, VIX and SENTIMENT indicators were neutral. Overall this
is a NEUTRAL indication.
