FACTORY ORDERS (Financial Post)
“New orders for U.S.-made goods fell in November, pulled
down by steep declines in demand for machinery and transportation equipment,
pointing to sustained weakness in manufacturing despite an easing in trade
tensions between Washington and Beijing. Factory goods orders dropped 0.7%...
Factory orders dropped 0.7% compared to November 2018.” Story at…
ISM NON-MANUFACTURING INDEX (Institute for Supply
Management))
“Economic activity in the non-manufacturing sector grew
in December for the 119th consecutive month, say the nation's purchasing and
supply executives in the latest Non-Manufacturing ISM® Report On Business®…"The
NMI® registered 55 percent, which is 1.1 percentage points higher than the
November reading of 53.9 percent. This represents continued growth in the
non-manufacturing sector, at a slightly faster rate.” Press release at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 slipped about 0.3% to 3237.
-VIX slipped about 0.4% to 13.79.
-The yield on the 10-year Treasury rose to 1.823.
It still looks like the S&P 500 all-time high of 3258
Thursday was a short-term high. We’ve
seen a number of top indicators calling a top, so my call has nothing to do
with the situation in the middle east. If
the high of 3258 is taken out, I’ll have to cover my short-position.
Indicators slipped some today. The MACD of S&P 500 price had a bearish
crossover. My MACD of breadth on the
NYSE turned bearish 3 days ago. Otherwise, Bull/Bear Signs were little changed from
yesterday.
My daily sum of 20 Indicators declined from -1 to
-5 (a positive number is bullish; negatives are bearish) while the 10-day
smoothed sum that negates the daily fluctuations declined from -9 to -18
(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 looks
like we are in for a bit of a pullback.
Any pullback should be small: there were a decent number
of new-highs when the S&P 500 made its all-time high recently; the Fosback
New-High/New-Low Logic Index remains much closer to a buy than a sell.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2
Most Recent Day with a value other than Zero: -2 on 7
January (Divergence between Breadth and the S&P 500 is bearish; 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:
I own Apple (AAPL) and the Technology ETF (XLK). In both
cases I’m holding outsized positions. Outsized positions can be a risk since stock-specific, bad news can bring on losses in a hurry. AAPL is 14% of my stock portfolio. It is normally recommended that a single stock should be no more than 4% of the portfolio to reduce risk.
I tend not to sell until the #1 ranked security
drops to #3 or #4 or if there is a newsworthy bearish event. Trying to hold the #1
ranked issue all the time results in too much trading for me. I’m considering Intel (INTC) if we get a buying
opportunity. Its PE is well below the overall
Dow’s PE and its momentum rank has been around #2 or #3 recently. It has a
Dividend north of 2.1%.
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.
For more details, see NTSM Page at…
TUESDAY 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
Tuesday, the PRICE indicator was Bullish; VIX,
VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator
remained to HOLD.
