ADP EMPLOYMENT (MarketWatch)
“The nation’s businesses added a modest 135,000
private-sector jobs in September, ADP said, in another sign that hiring is slowing along with
the broader U.S. economy.” Story at…
CRUDE INVENTORES (OilPrice.com)
“Crude oil prices fell further today after the Energy
Information Administration reported an inventory build of 3.1 million barrels for
the week to September 27.” Story at…
OCTOBER IS THE SECOND-BEST MONTH (WSJ)
“The crashes of 1929 and 1987 and the tumult of 2008 have
given the month a bad reputation. Over the past two decades, however, October
has been the second-best month of the year for the S&P 500 and the Dow
Jones Industrial Average, according to the Stock Trader’s Almanac.” Story at…
GAINS ARE OVER FOR THIS YEAR (CNBC)
“Bank of America Merrill Lynch says the S&P isn’t
heading higher into the end of the year. The firm’s 2,900 year-end S&P
target is slightly above where the index is currently trading. ‘Ongoing trade
uncertainty and signs of macro deterioration ... leave us neutral on the
S&P 500 for 2019,’ chief strategist Savita Subramanian wrote in a note to
clients.” Story at…
PAUL SCHATZ COMMENTARY EXCERPT – WATCH WEDNESDAY’S ACTION
(Heritage Capital)
“If the uptrend is still strong, I would expect early [Wednesday]
morning weakness to be bought with the bulls coming in stronger after lunch. If
not, then early morning weakness should lead to a mid-morning rally that is
sold with lower prices after lunch and into the close.” – Paul Schatz,
President Heritage Capital. Commentary at…
My cmt: We got the bullish scenario Mr. Schatz mentioned, but the close may not have
been high enough to suggest an end to the pullback. Perhaps we’ll see it soon.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell about 1.8% to 2888.
-VIX jumped about 11% to 20.56.
-The yield on the 10-year Treasury dipped to 1.598.
The S&P 500 closed 4.1% below its recent 12 Sep top
and is 4.6% down from its all-time high. The S&P 500 blew through the 100-dMA
at 2925 and closed on the lower trend-line established by the 3 June low and 14
August low. Chart wise, this may be signaling an end to selling. (This depends
on the scales chosen for the x and y axes; however, I think my analysis here is
valid.) The 200-dMA is about 1.8% below today’s close and that may be
where this pullback ends if it does go lower. If it doesn't stop there, we may be in real trouble.
It still looks like we are near a bottom for this weak
pullback. I’ve been saying this for a few days – it’s more true today, but we
still see bearish signs. Some new ones follow:
-Comparing Breadth to the S&P 500, we see that S&P
500 is out in front of its internals and this suggest more downside ahead.
-5-10-20 Timer system is giving a sell signal.
-Today was another Distribution Day. That’s still 7 in
the last 6-weeks. 5 is a bearish sign.
BULLISH SIGNS
-Bollinger Bands are oversold and RSI is now oversold.
This is suggesting a bounce, but oversold conditions can remain for a while.
-Today was another statistically-significant down-day (as
was yesterday). That just means that the price-volume move exceeded my
statistical parameters. Statistics show that a statistically significant
down-day is followed by an up-day about 60% of the time. Big down-days can
signal panic selling; but more often than not, they signal an end to short-term
selling. This time? We’ll see. Indicators would suggest more downside ahead. The
close today was outside of the bottom 25% of the daily range, but just barely. Had
we seen a stronger upward close today (even if the day had been down) we might
have been able to suggest the bottom was in.
My daily sum of 20 Indicators declined from -5 to
-12 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from -11 to
-25. (These numbers sometimes change after I post the blog based on data that comes
in late.) A reminder: Most of these indicators are short-term.
I probably won’t make any drastic investment changes
unless I get a sell-signal from the long-term indicator. We may see a sell signal
soon if we see more bearish action. In spite of all the angst on CNBC, the
market is down less than 5% from its all-time high.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral
reading.)
Today’s Reading: -2
Most Recent Day with a value other than Zero: -2 on 2 October.
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or better is a Buy
Sign.
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).
Using the Short-term indicator in 2018 in SPY 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 50% invested in
stocks as of 27 Sept 2019 (down from 55%). This is a conservative balanced
position appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the VOLUME indicator is Bearish;
VIX, PRICE and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator remained HOLD.
