TARIFF TIFF (Heritage Capital)
“As I have said all along, I fully understand why Trump
has been taking this course [tariffs on China], but I don’t agree with it. And
if we can’t make a deal with China, something that the administration has been
feverishly working on for many months, it won’t be hard to imagine expanding
this battle into Europe…Last week,
I commented that I thought stocks had begun a period of digestion or even a
mild pullback. I still think that’s the case and not the beginning of a
meaningful bout weakness.” – Paul Schatz, President Heritage Capital. Full
commentary at…
Chuck Schumer, Senate Minority Leader, supported Trump’s
stand in the Chinese tariff argument. He urged Trump to “hang tough” in our
negotiations. I think China is making a mistake if they expect the United
States to settle for a deal that is not even handed and fair. We’ve been
getting the short-end for too long.
THE DEATH ZONE (Evil Speculator - Friday)
“Technically speaking we are in the midst of a death
zone. Why? Because…sell algos are battling it out with buy algos which is
creating clean zigzag formations marked by sharp turns. Unless you are a
suicidal selfie snapping adrenaline junky this is not the time to pick a side
[i.e., pick long or short]. I picked a lottery long ticket yesterday and was
run over just a few hours later. And I’m not about to engage in revenge trading
just to somehow ‘settle the score’ or to make myself feel better. After all it
was a small position and I knew the odds were low.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.5% to 2932.
-VIX jumped about 20% to 15.44.
-The yield on the 10-year Treasury dropped to 2.488%.
When the day started today it looked pretty bad for the
S&P 500. Futures were down between
1.5% to 2% depending on when I checked. The S&P 500 finished the day only
down about one-half percent – a moral victory. The Index held up in late-day
action, for the most part, although it did fall a couple points into the close
and that’s mildly bearish.
So, we might be optimistic for the near future, but there
are some issues:
-The Options Boys did not agree with today’s advance; VIX
closed nearly 20% higher and that’s a number
that suggests some more downside ahead.
-The Bond Ghouls were bearish, too.
-Statistical analysis of market moves shows the market is
too calm and a 2-4% one-day decline may still be in the cards. Given that there
are no topping indicators issuing sell signals today, a small correction in the
3-5% range seems more likely than a big drop – if a correction does develop
from here.
-After a wild start, total volume was actually about 5% lower
today than we’ve seen over the last month so today was not a panic day by any
means. Only 38% of the total volume was advancing;
only 42% of stocks were up on the day for the NYSE.
-The Smart Money (late-day-action) is headed down.
Will we see a decline? If we do, the 50-dMA is now 2855
and that’s a major support point.
My daily sum of 20 Indicators improved from +4 to +8 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +19 to +31. Most of
these indicators are short-term. More bullish improvement in the indicators!
I still have a very low % invested on stocks and I’m still
looking for a buying point – perhaps this is the start of a buying opportunity?
We’ll see.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 30
April (RSI was negative.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
NOTE: Topping
indicators are good at identifying a blow-off top with buyers in a frenzy. These indicators are not so good at
identifying a slow, rollover-top that can happen when buyers simply go on
strike.
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)
*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 improved
to POSITIVE on the market at the close. (This is probably another case where today’s
poor stats are replacing stats from 2-weeks ago that were even worse. It doesn’t
always mean that conditions are much better.)
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).
I ran the numbers for 2018. Using the Short-term
indicator would have made a 5% gain instead of a 6% loss for buy-and-hold. The
methodology was Buy on a POSITIVE indication and Sell on a NEGATIVE indication
and stay out until the next POSITIVE indication. The back-test included 13-buys
and 13-sells, or a trade every 2-weeks on average.
My current stock allocation is about 30% invested in
stocks as of 9 January 2019. I sold the rally about half way up expecting a
retest of the lows Dec 2018.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, PRICE remained Positive; VIX, VOLUME, and
SENTIMENT indicators were neutral. Overall this is a NEUTRAL indication.
