FED BEIGE BOOK (MarketWatch)
“Ten of the Federal Reserve’s 12 districts saw
“slight-to-moderate” growth in late January and February, while St. Louis and
Philadelphia reported “flat economic conditions,” according to the Fed’s Beige Book report released Wednesday...The
tone of the Beige Book report was somber. The partial government led to slower
activity…” Story at…
ADP EMPLOYMENT (StreetInsider)
“Private sector employment increased by 183,000 jobs from
January to February according to the February ADP National Employment Report®…"We saw a modest slowdown
in job growth this month," said Ahu Yildirmaz, vice president and co-head
of the ADP Research Institute.” Story at…
CRUDE INVENTORIES (OIlPrice.com)
“A day after the American Petroleum Institute once again
took markets by surprise by reporting a crude oil inventory build of 7.29 million
barrels, the Energy Information Administration said inventories were indeed up, by 7.1 million
barrels for the week to March 1.” Story at…
THIS COULD JUST BE A BEAR MARKET RALLY (MarketWatch)
“The rally since Christmas Eve has indeed been sharp and
powerful. Investors’ hopes have been rekindled in a big way. The Hulbert Nasdaq
Newsletter Sentiment Index (HNNSI), which measures the average recommended
exposure level among Nasdaq-oriented market timers, recently rose to one of its
highest levels ever — higher than 96% of daily readings since 2000, in fact. This does not bode
well for the market’s near-term prospects, according
to contrarian analysis.” Story at…
MONTHLY CHART GIVES BEARISH SIGNAL (Real Investment
Advice)
“Currently, the monthly indicators have all aligned
to “confirm” a “sell signal” which
since 1950 has been somewhat of a rarity. Yes, the recent signal could turn out
to be a “1987” scenario
where the market rallied immediately back and reversed the signals back to
a “buy” a
few months later. Or this could be the beginning of a more substantial
corrective process over the course of many months.” Story at…
HEADLINE: Alexandria Ocasio-Cortez’s chief of staff ran
$1M slush fund by diverting campaign cash to his own companies.
(WashingtonExaminer) Story at...
Wow! It didn’t take her long to fit in with the
Washington elite…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dipped about 0.7% to 2771.
-VIX rose about 6% to 15.68. (The Options Boys are
beginning to wake up, but they aren’t too worried yet.)
-The yield on the 10-year Treasury dropped to 2.690%
The Fed Beige book and the ADP report stories linked
above used the word “slowdown” or “slowdown in activity.” News over the past 2
weeks have included reports of an economic slowdown. Now that earnings season
has ended, it appears there may not be enough good news to reverse the downtrend
in the market, at least not for a while. Whether we’ll see a retest of the
December low remains to be seen, but it looks like the mood of the market has
changed.
A lot was made of the rapid rise in breath (% of stocks
advancing vs declining) as stocks rose from the Christmas Eve correction-bottom.
It is curious to note that over the last 3 days breadth is falling at a much
faster rate than it was climbing over the same period after the December 2018
bottom. Looking at the 26 Jan 2018 top, breadth is currently falling more than
twice as fast. I can’t say this predicts anything; it’s just interesting, or
perhaps a bit scary.
My daily sum of 20 Indicators slipped from zero to -2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from +54 to +44. This is a
bearish indication. Indicators haven’t changed much, however, Breadth has been
sharply down and now shows that over the last 10-days only 48% of issues on the
NYSE have advanced. That pushed my short-term, market-internals indicator to
Bearish.
See yesterday’s blog for a run-down of some short-term
signals…
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained NEGATIVE 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
Wednesday, 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.
