TRADE DEAL (WSJ)
“President Trump is expected to sign off on a limited
agreement aimed at ending the trade war with China that would prevent new
tariffs planned for Sunday and roll back some existing tariffs, according to a
person familiar with the matter.” Story at…
PPI (Reuters)
“U.S. producer prices were unexpectedly unchanged in
November as increases in food and gasoline prices were offset by declining
costs for services, pointing to muted inflation despite a recent uptick in
consumer prices.” Story at…
JOBLESS CLAIMS (MarketWatch)
“The number of Americans who applied for unemployment
benefits in early December soared to highest level in more than two years, but
the spike was likely tied to a later than usual Thanksgiving holiday instead of
rising layoffs.” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.9% to 3169.
-VIX dipped about 7% to 13.94.
-The yield on the 10-year Treasury rose to 1.894.
There were 3 Top-Signals at today’s close: The S&P
500 has gotten too far ahead of advancing stocks on the NYSE; Bollinger Bands
are overbought; the S&P 500 is too far ahead of its Market Internals as
measured by my Money Trend indicator. We can be somewhat concerned that the
market is stretched, however, there was good news in today’s numbers too.
7.2% of issues on the NYSE made new highs at today’s
all-time high. This is above the 5-year average for this stat and it indicates decent
Breadth at today’s top, although this is a one-day point. On a longer-term
basis, the Index is too far ahead of advancing stocks and this is 1 of the 3 Top-Indicators
noted above. Still, this one-day number suggests any pullback will be muted in
the 3-5% range I have been talking about for a while.
The S&P 500 closed at the upper trend-line on a
statistically significant up-day today. That just means that the price-volume
move exceeded my statistical parameters. Statistics show that a statistically-significant,
up-day is followed by a down-day about 60% of the time. It also sometimes
indicates a top. We’ve also had 6 statistically-significant days in the las 15
trading days. That sort of action also tends to happen at tops.
This all adds up to a decent suggestion that we’ll see a
pullback soon, especially if we see another top indicator, such as RSI, join
the indicators suggesting a top.
My daily sum of 20 Indicators improved from -2 to zero
(a positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations dropped from +16 to +3 (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.
As I’ve written before, I think any pullback should be
relatively small – say down to the 50-dMA (3058), about 3-5% lower than current
values. A drop to the 100-dMA at 3002 is not out of the question since the
100-dMA is actually on the lower trend line, but it seems like there is a lot
of pent-up buying energy that should prevent a big drop. The S&P 500 is currently down 0.4% from
its recent top
I remain bullish in the long-term; short-term 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 12
December (Bollinger Bands; Money Trend; Breadth vs S&P 500 all calling for
a top).
(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.
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEUTRAL 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
Thursday, the PRICE indicator was Bullish; VIX,
SENTIMENT and VOLUME Indicators were neutral. Overall, the Long-Term Indicator
remained HOLD.
