ISM NON-MANUFACTURING (Bloomberg)
“A gauge of U.S. service industries rebounded in February
by more than forecast on strength in new orders, a sign the economy remains on
relatively solid footing even with growth projected to cool this quarter. The
Institute for Supply Management’s non-manufacturing index rose 3 points to 59.7…”
Story at…
NEW HOME SALES (Reuters)
“Sales of new U.S. single-family homes rose to a
seven-month high in December, but November’s outsized jump was revised lower,
pointing to continued weakness in the housing market.” Story at…
JOHN HUSSMAN COMMENTARY EXCERPT (Hussman Funds)
“…implied volatility in the options market is rather low,
so it’s possible to maintain a rather neutral near-term outlook while still
making some allowance for a large move in either direction. What matters most
here is to recognize where valuations are in the cycle, and that even a shift
to a speculative mentality could quickly run into a wall of economic
deterioration, as was the case both in early-2001 and early-2008. So while our
near-term outlook is fairly neutral, we also maintain our expectation of profound
full-cycle market losses. Beyond that, there’s no need to approach near-term
uncertainty as if we were actually certain of the market’s near-term direction.”
– John Hussman, PhD. Full commentary at…
HAVE DEMOCRATS LOST THEIR MINDS?
“At a closed door meeting of House Democrats, Rep
Alexandria Ocasio-Cortez, D-NY, said some of her colleagues could find
themselves “on a list” of primary election targets after they voted for a
Republican amendment requiring that immigrants in the United States illegally
who try to buy guns be reported to US Immigration and Customs Enforcement…” –
Washington Post.
My cmt: Democrats oppose gun ownership…except for illegal
immigrants?!
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped about 0.4% to 2790.
-VIX rose about 1% to 14.74.
-The yield on the 10-year Treasury dropped to 2.717%
My daily sum of 20 Indicators remained zero (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations dropped from +62 to +54. This is a mildly
bearish indication. Here are some short-term signals…
BEAR SIGNS
-Up-volume is falling and has been since mid-January.
-Breadth has been falling since mid-January.
-My Money Trend indicator is falling. This indicator
peaked in mid-January.
-New-high/new-low data is headed down.
-RSI was overbought 3 days ago.
-Smart Money (based on late-day action) is quite bearish.
It turned down 3-weeks ago.
-Cyclical industrial stocks (XLI-ETF) have been
underperforming the S&P 500 over the last 10 days. Utilities (XLU-ETF) has
been outperforming the S&P 500 recently.
Both of these indications are bearish.
-MACD made a bearish crossover 3 days ago.
BULL SIGNS
-VIX is falling on a smoothed basis, however, this currently
bullish indicator may switch back to neutral soon.
-Over the last 2-weeks, up moves have been larger than
down moves.
The S&P 500 Index is headed down along with market
internals, including the advance decline line. This dip isn’t over yet, but it’s
anybody’s guess how far the markets will fall. I see projections all over the place,
including, “The dip is over – Buy.”
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…
TUESDAY 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
Tuesday, 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.
