HERITAGE CAPITAL COMMENTARY EXCERPT (Heritage Capital)
“…the Dow, S&P 500 and NASDAQ 100 all look similar
and very constructive as they have all already broken out to new highs and are
now working that off. Many, many times a security will have an obvious break
out, only to stop in short order for a pause to refresh that works its way back
to that key break out level. Sometimes, the instrument will regather itself and
surge higher while occasionally it will completely fail after sucking in the
bulls and move quickly in the opposite direction.” – Paul Schatz, President, Heritage
Capital. Commentary at…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“…the National Retail Federation expects retail sales
during November and December will rise ~4% from 2018 levels. This leads us to
believe that the US economy will continue its slow but steady foot race… a 75
basis point cut has historically been a positive for the equity market, leading
to a 12-month average forward return of ~23%...Seasonal trends should continue
to be supportive of the equity market, since over this same timeframe, the
S&P 500 has posted an average return of 8.0% from November to April and has
been positive over 85% of the time!” Full Commentary at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.2% to 3110.
-VIX slipped about 6% to 12.34.
-The yield on the 10-year Treasury was unchanged at 1.773%.
Well…it’s been a month since I had real time to sit down
and examine the numbers in detail, so let’s start with a run-down of some of
the important indicators.
BEAR SIGNS
-New-high/new-low data is headed lower.
-Money Trend is falling.
-Statistically, the S&P 500 remains too calm
(measured by daily moves in price-volume) suggesting down moves ahead and a large
move down (>1% in a day) to break the market action that is too calm.
-MACD of Price.
-MACD of Breadth.
-Smart Money (based on late-day-action) is pointing down.
-Cyclical Industrials are underperforming the S&P 500
over the past 2-weeks. When investors are worried, cyclicals underperform.
(This divergence is not big now, so this isn’t a strong indication.)
-New-Highs are slipping.
-Only 49.2% of stocks on the NYSE have been up over the
last 10-days.
NEUTRAL
-Breadth vs the S&P 500 index shows that the Index
ahead of most stocks on the NYSE, but not to the extent that we can put this
indicator in the Bear category.
-RSI was overbought 7 thru 20 Nov, but it has slipped and
is now neutral.
-Bollinger Bands are elevated, but neutral.
-Sentiment is elevated, but not in the red zone.
-Fosback High-Low Logic Index indicators.
-There are currently no Top-indicators in bearish mode,
though some are close.
-Sentiment is elevated, but not in the red zone.
BULL SIGNS
-Up moves have been bigger than down moves over the last
month.
-VIX is falling nicely.
-The 5-10-20 Timer is still bullish.
-Advancing volume has been up over the last 10-days.
Overall, we see the following:
My daily sum of 20 Indicators improved from -6 to -3
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations declined from -15 to -19 (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 longer term; Short-term the market
remains unsettled. I’m not sure where the market will go from here (up, down or
sideways), but I don’t see a major drop.
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: -1 on 20
November.
(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)
I’ll work on the ETF data
soon. Dow 30 is now up to date.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
improved to NEUTRAL on the market. Internals had been negative for the previous
4 trading sessions
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
Friday, the VIX and PRICE indicators
were positive; the SENTIMENT and VOLUME Indicators were neutral. Overall, the
Long-Term Indicator improved to BUY. The important BUY was the one we issued 29
August; we reinforced that bullish view again on 3 October. Today’s BUY signal
just means that conditions are improving.
