WAS IT JUST A BAD DREAM (Financial
Sense)
WHY DIVERSIFY?
The chart shows the returns of 2 buy and hold portfolios:
One all bonds; the other all stocks.
Since 1999, the return is the same. Of course, I am not a buy-and-hold
fan.
Chart from…
MAKING THE ROUNDS ON FACEBOOK
“Imagine living in the Grey zone and the Blue zone voted
against you. This is why we have an electoral college.”
My cmt: As explained by Jon Meacham in his masterpiece on
Jefferson, “Thomas Jefferson: The Art of Power”,
the intent of the Constitution/Electoral College was to require that a
candidate for President win a majority of states; not a majority of votes. Currently,
one can win without a majority of states due to changes in the College, but the
principle remains. The College is a check on Presidential power; without an Electoral
College, the President would not be responsive to most of the states. The nation requires a President of the United
States, not a President of the Cities.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 0.1% to 2798.
-VIX dipped about 1% to 16.33.
-The yield on the 10-year Treasury dropped to 2.401%.
One of my statistical checks on the S&P 500 results
in what I call the Panic Indicator. When there is a huge increase in the size
of the daily value of price-volume it signals panic-selling. This can happen
after a top or near or a bottom. The indicator was not far from being triggered
Friday. Perhaps it was close enough; that’s a concern for the bulls. The last
time it was triggered was in October 2018.
The S&P 500 dropped 16% after the panic indicator flashed red.
I looked back to see when the indicator matched Friday’s
number and there were only 2 instances in the past several years. Once, there
was no drop in the S&P 500 afterward. The second time there was a 5% drop.
There’s not much sample size, so no point in concluding much. It is still possible
that we will re-test that 2018 low.
We noticed last night that the Futures did not react much
to the Mueller report. That supports the
conclusion made by many on Friday that Friday’s drop was due to the economic
news out of Europe.
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.
This looks like a top.
The Index remains 1.6% above the 200-dMA.
My daily sum of 20 Indicators dropped from +2 to -8 (a positive
number is bullish; negatives are bearish) while the 10-day smoothed version
that negates the daily fluctuations dropped from +51 to +42. Most of these
indicators are short-term.
MACD reversed to negative last Thursday. MACD can
flip-flop a lot, but with a number of other indicators joining its negative call,
I am in the Bear camp. I think the markets will fall from here. I have no guess
on how far they will go.
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 slipped
to 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 as of 9 January 2019.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the PRICE
indicator was positive. The VOLUME, VIX and SENTIMENT indicators were neutral.
Overall this is a NEUTRAL indication.
