“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
The NYSE closes at 1PM Tuesday, Christmas Eve.
DURABLE ORDERS (APNews)
“Orders to U.S. factories for big-ticket manufactured
goods fell by the largest amount in six months, led by a large decrease in orders
for defense aircraft and parts. A closely watched category that tracks business
investment ticked up 0.1%.... The U.S. economy, which has recently been
flashing warning signs of a slowdown, now seems to be finishing the year
stronger in spite of the isolated issues at GM and Boeing. ” Story at…
NEW HOME SALES (MarketWatch)
"Sales of newly-constructed homes in the U.S. increased
1.3% on a monthly basis in November to a seasonally-adjusted annual rate of
719,000, the
government reported Monday.” Story at…
LARRY ADAM COMENTARY EXCERPT (Raymond James)
“Takeaways: The Fed Will ‘Light the Way’ for Economic
Expansion; Earnings Growth Could ‘Unwrap’ New Record Highs; The Rollout of 5(G)
Could Be the ‘Gift that Keeps on Giving’” Commentary at…
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“Historically, the market is in the midst of one of the
most favorable times of the year from now through early January. And the
traditional Santa Claus Rally (SCR) is scheduled to begin on Christmas Eve.
That’s five trading days before year-end. Remember the old adage made popular
by Yale Hirsch from the Stock Trader’s Almanac? “If Santa Claus should fail to
call, bears may come to Broad and Wall.” While Yale posited that a bear market
would ensue, the truth of the matter is that a decline usually follows during
the first half of the new year with Q1 being the most likely time.” Commentary
at…
My cmt: Paul is writing about small down moves in the 5%
range…at least for now.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 climbed about 0.1% to 3224.
(Another all-time high.)
-VIX rose about 0.8% to 12.61.
-The yield on the 10-year Treasury rose to 1.929.
Now we’ll find out if there will be a real Santa rally. The Holiday period is usually punctuated by a
low volume melt-up. We’ll see. If the rally continues, as is usual for the
Santa rally, we’ll probably have to pay the piper when the Pros get back to
work after New Year’s. That small pullback is still coming.
Bollinger Bands improved slightly so 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 8
trading days); and the S&P 500 is too far above its 200-dMA when sentiment
is considered. It’s 9% above tits 200-dMA without considering sentiment.
My daily sum of 20 Indicators declined from +4 to
+3 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations improved from +21 to +23
(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.
The rest of today’s blog will look familiar…
As I’ve written before (way too much it seems), we’re due
for a pullback, but I think any pullback should be relatively small – say down
to the 50-dMA (3096), about 3-5% lower than current values. A drop to the
100-dMA at 3016 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.
We also note that the Fosback New-High/New-Low Logic
Index is much closer to giving a Buy indication than a Sell indication. This is
just another sign that any selloff should be short-lived.
At today’s new all-time high we saw good Breadth, another
sign of a market that is generally healthy, but somewhat extended.
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 20
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.
MONDAY 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
Monday, 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.
