Merry Christmas and a Happy Hanukkah!
CFNAI (Chicago FED)
“Index points to a rebound in economic growth in November…
…Led by improvements in production-related indicators,
the Chicago Fed National Activity Index (CFNAI) rose to +0.56 in November from
–0.76 in October. All four broad categories of indicators that make up the
index increased from October, and two of the four categories made positive
contributions to the index in November. The index’s three-month moving average,
CFNAI-MA3, moved up to –0.25 in November from –0.35 in October.” See the link
for the Latest
CFNAI Release at…
RICHMOND FED MANUFACTURING (Advisor Perspective)
“Fifth District manufacturing activity slowed in
December, according to the most recent survey from the Federal Reserve Bank of
Richmond. The composite index fell to -5 in December from -1 in November.’ The
Report said, “Survey results suggested modest employment growth and rising
wages in November. However, firms continued to struggle to find workers with
the necessary skills. Respondents expected this struggle to persist and
employment and wages to continue to grow in the near future.” Story at…
Full Report at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 slipped about a point to 3223.
-VIX rose about 0.5% to 12.67.
-The yield on the 10-year Treasury slipped to 1.902.
We expect low volume over the Holiday period so we may
not get much valuable information until after the new year. (Volume today was about one third of the average volume for the month.) It still looks like
that small pullback is coming; probably starting after the pros return from
their holiday break.
There are now 3 topping-indicators calling a top. The top
indicators are: RSI was way overbought; the S&P 500 is too far ahead of
advancing issues on the NYSE (as it has been for the last 9 trading days); and
the S&P 500 is too far above its 200-dMA when sentiment is considered. It’s
8.9% above tits 200-dMA without considering sentiment and that is stretched too.
My daily sum of 20 Indicators declined from +3 to
+1 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations improved from +23 to +26
(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 in the long-term; short-term - it’s STILL
the broken record report - it still looks like we are in for a bit of a
pullback.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -3
Most Recent Day with a value other than Zero: -3 on 24
December (RSI was overbought; Breadth vs S&P 500 is calling for a top; and the S&P 500 is
too far above its 200-dMA when sentiment is considered).
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher 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.
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Tuesday, the PRICE and VOLUME indicators were
Bullish; VIX and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator remained BUY. At this point it only means that conditions have
been good recently. The long-term
indicator is designed to signal a BUY after a bottom as conditions improve.
Sometimes it can signal a buy at a Top when conditions look good. At present, I
expect a small pullback so we are looking for a better buying opportunity.
