FOMC RATE DECISION (CNBC)
“The Fed keeps its benchmark rate in a target range of
1.5%-1.75% as expected. The “dot plot” of individual members’ future
projections indicated, on balance, no hike in 2020.” Story at…
CPI (MarketWatch)
“U.S. households paid more for energy, health care and
rent in November, pushing the rate of inflation up to the highest level in a
year. The consumer price index rose 0.3% last month…” Story at…
CRUDE INVENTORIES (OIlPrice.com)
“Crude oil prices moved lower today after the Energy
Information Administration reported a crude oil inventory build of 800,000 barrels
for the first week of December.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.3% to 3142.
-VIX dipped about 4% to 14.99.
-The yield on the 10-year Treasury slipped to 1.800.
Market internals have been drifting lower when compared
to the S&P 500. This topping indicator is not yet a sell, but it is getting
closer. Bollinger Bands are close to a sell signal too, but RSI (14, SMA) is
solidly in neutral territory so we don’t have a sell signal here either. (I use
Bollinger Bands and RSI in tandem.) The Smart Money has been selling, based on
late-day action. XLI-ETF (cyclical
industrials) have been under-performing the S&P 500 over the last 2-weeks
to 2-months while the XLU-ETF (utilities) have been out-performing the Index
too. These are bearish signs, but nothing is really set in stone yet. The
market is getting stretched, but I have been suggesting a small retreat/stall
for some time.
One consistent negative sign has been my statistical
analysis of the price-volume that is showing the market is too calm – in fact,
it is warning of a calm before the storm. We still have not seen a drop big enough to
clear this indicator; it is still calling for a one-day, >1% drop in the
S&P 500.
This statistical measure warns of complacency and we can
also see this in the VIX that was 21 back in October and has fallen back below
15 today. These signs are usually seen as much as a month before a top so we
really can’t trade this indicator.
My daily sum of 20 Indicators remained -2 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations dropped from +29 to +16 (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 (3053), about 3-5% lower than current
values. A drop to the 100-dMA at 3000 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: 0
Most Recent Day with a value other than Zero: -1 on 20
November (RSI was overbought).
(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.
WEDNESDAY 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
Wednesday, the PRICE indicator was Bullish; VIX,
SENTIMENT and VOLUME Indicators were neutral. Overall, the Long-Term Indicator
remained HOLD.
