“Employers added 20,000 jobs during the month, the fewest
since September 2017, missing all economist estimates…’I don’t think you want
to say that 20,000 is the new trend, but the trend probably is shifting down,”
said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New
York.’” Story at…
HOUSING STARTS / BUILDING PERMITS (MarketWatch)
“Construction on new homes, known as housing starts,
leaped nearly 19% in January, rebounding from a big drop at the end of 2018…Permits
to build new homes, meanwhile, rose 1.4%...” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dipped about 0.8% to 2743.
-VIX dipped about 3% to 16.05. (The Options Boys aren’t
worried.)
-The yield on the 10-year Treasury slipped to 2.633%
As posted earlier, Chinese exports fell over 20%
year-over-year Friday, far worse than expected.
We also saw Europe announcing a new stimulus program yesterday. As
announced today, US job creation dropped to 20,000 last month. For perspective,
over 300,000 jobs were created in January.
Is this a Bear Sterns moment? The collapse of Bear Sterns
signaled the stock market crash and Financial crisis of 2008.
Checking stock-market technical data gives conflicting
answers: Bulls noted that after the Christmas Eve bottom, the advance-decline
line improved at a rate that has only occurred previously in bull markets. That
was a so-called “Breadth Thrust,” a harbinger of future gains. On the other
hand, I noted that during the decline there were 3 consecutive days with more
than 1000 new-lows. That has only
happened during major Bear Market crashes. In fact, both of these outlier
statistics may simply be the result of algorithmic trading and quaint
strategies. The bull/bear question will only be resolved as more data comes to
light and Mr. Market (the sum of all investor opinions) anticipates where the
economy is going.
For the time being, we know that the economy is slowing
and possibly quite rapidly. A slowing
economy probably doesn’t support prices that we saw at the September highs
given that earnings are expected to fall next quarter.
What to do? Be cautious. Cut investments in stocks to a
level with which you are comfortable until we see get more clarity. The probability that we will see a drop of
close to 15% (from here) and retest of the prior low of 2351 has increased. Only
a retest at or near the 2351 level, or a climb back above the old highs (not
likely any time soon), will tell us whether 2351 was THE bottom.
Today the S&P 500 remained below its 200-dMA
suggesting the first-bounce, correction-rally is officially over. That doesn’t guarantee
a drop to the correction low – it just suggests the mood of the market has
changed for the worse.
My daily sum of 20 Indicators slipped from -5 to -6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations dropped from +31 to +14. This is a
bearish indication. See Tuesday’s blog for a run-down of some short-term
signals. One key indicator compares Breadth to the S&P 500. It may soon signal a top – and we’ve already
declined 2.1% from the top. That’s is bearish; breadth has been falling, but
the S&P 500 hasn’t moved much.
Next week will be interesting.
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
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
Friday, the PRICE indicator
was positive. The VOLUME, VIX and SENTIMENT indicators were neutral. Overall
this is a NEUTRAL indication. I remain defensive, expecting some sort of
pullback.
