“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
I will be taking a break from writing the blog for a
bit. Wednesday will be my last blog for the next month or so. I may post occasionally – we’ll see. I expect
to have the NTSM Blog up and running again in late November.
ALL IS OK (Heritage Capital)
“While I do not think it’s a layup for a breakout right
here, I feel very confident that Dow 28,000 will be kissed this quarter with
leadership coming from some of the key sectors like semis, discretionary and
banks. For all the talk about high yield bonds lagging and quietly forecasting
doom, they are pretty close to an all-time high…[and]… the NYSE A/D Line which
is actually at new highs now.” – Paul Schatz, President Heritage Capital.
Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3007.
-VIX dipped about 2% to 14.00.
-The yield on the 10-year Treasury was little changed at
1.805.
My daily sum of 20 Indicators improved from +2 to
+4 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations rose from -2 to +9
(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.
Late-day selling over the last month turned up (bullish)
today. In theory, that’s when the Pros
trade and this indicator has been quite negative. It’s good to see it is headed
up for a change.
The overbought / oversold index switched to neutral
today. That was the first overbought
signal we had seen, but no longer. It is based on advance-decline numbers.
It is hard to find any significant bear signs today. The
Overbought-oversold index is overbought, but this older indicator is very early
so I will ignore it for now.
I remain bullish.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
Most Recent Day with a value other than Zero: +2 on 3
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 ITA-ETF took another hit today because Boeing is a big
holding of the fund.
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 improved
to POSITIVE 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 60% invested in
stocks as of 7 Oct 2019 (up from 50%). This is a conservative balanced position
appropriate for a retiree. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VIX indicator was positive;
PRICE, VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator remained HOLD, although it is leaning bullish, especially since VIX
is one of our best indicators.
