SMALL BUSINESS OPTIMISM (Advisor Perspectives)
“The small business Optimism Index maintained a
historically solid reading, but took a dip in September, falling 1.3 points to
101.8. September’s figure falls within the top 20% of all readings in the
Index’s 46-year history.” Commentary at…
PPI / CORE PPI (MarketWatch)
“The wholesale cost of U.S. goods and services posted the
steepest decline in September since the first month of the year, largely
reflecting lower gasoline prices and signaling that inflation is likely to
remain low… a more closely followed measure that strips out volatile food,
energy and trade-margin costs was flat in September. The increase in the
so-called core PPI over the past year dropped to 1.7% from 1.9%.” Story at…
MARKET REPORT / ANALYSIS
Tuesday the S&P 500 dropped about 1.6% to 2893.
-VIX rose about 14% to 20.28.
-The yield on the 10-year Treasury dipped to 1.538.
We didn’t get a positive day today to confirm my bullish
position, but it still looks like we got confirmation of the low. There were a
number of bottom signs, though this pullback isn’t big enough to trigger major
bottom-signals:
-The S&P 500 closed at lower trend line on a
statistically significant down day. 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 investor panic; but more often than not, they signal an
end to short-term selling, especially at the lower trend-line.
-The S&P 500 was a whisker from oversold (bullish)
readings on both Bollinger Bands and RSI today. These are good short-term
trading signals, especially when they both agree. Since we are not in the middle of a crisis,
they should be good indicators for positive moves on the S&P 500. (If they
had been slightly lower, we would have had a +2 in Bottom Indicators.)
-Finally, Tuesday’s price tested the 2 Oct low. We saw
improvements in all of the market internals at the test. While the improvements were not large enough to
officially trigger a buy-signal based on calculations, we do have a "buy"
because signals are never very strong on small pullbacks, i.e., we were "close
enough" today.
We didn’t see a bounce at the end of the day that would
confirm my analysis, so it is possible that the markets will drift down
further, but I think we are close to a bottom. If we close much lower than
today, I’ll have to re-think my position.
A big drop from here, would be bearish.
My daily sum of 20 Indicators declined from -7 to
-10 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed version that negates the daily fluctuations dropped from -50 to
-57. (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 remain bullish unless we see further deterioration of
the S&P 500. If it does drop more, I’ll have
to re-evaluate. Futures are up about 0.2% as I write this (8:30 PM, Tuesday),
so let’s hope they hold.
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 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…
TUESDAY 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 60% invested in
stocks as of 7 Oct 2019 (up from 50%). This is a conservative balanced position
appropriate for a retiree.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the VOLUME indicator was
negative; VIX, PRICE and SENTIMENT Indicators were neutral. Overall, the
Long-Term Indicator remained HOLD.
