HOUSING STARTS (Business Insider)
“US housing starts spiked 16.9% in December to their
highest level in 13 years, according to a Friday release from the Census Bureau… Housing permits, a
popular forward-looking indicator for the sector, fell through the month by
3.9%, to 1.42 million.” Story at…
INDUSTRIAL PRODUCTION (MarketWatch)
“Industrial production fell 0.3% in December, the third
decline in the past four months, the Federal
Reserve reported Friday... “The sector is still weak, but the disaster
signaled by the ISM index looks to have been dodged,” said Ian Shepherdson,
chief economist at Pantheon Macroeconomics.” Story at…
JOLTS (CNBC)
“Job openings plunged to their lowest level in nearly two
years as hiring surged in November and the employment market got tighter, the
Labor Department reported Friday. Total vacancies tumbled by 561,000 to 6.8
million for the month…” Story at…
MICHIGAN SENTIMENT (Bloomberg)
“U.S. consumer sentiment remained elevated in January as
record stock prices and a strong job market buoy Americans, suggesting spending
will continue its steady gains. The University of Michigan’s preliminary
sentiment index for January edged down to 99.1…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.4% to 3330.
-VIX dipped about 2% to 12.10.
-The yield on the 10-year Treasury was 1.823.
We still see a good number of positive indicators. The
daily sum of 20 Indicators improved from +7 to +8 (a positive number is
bullish; negatives are bearish). The 10-day smoothed sum that negates the daily
fluctuations improved from +18 to +30 (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.
Here’s a Friday rundown of indicators:
BEAR SIGNS
-Bollinger Bands are overbought.
-MACD Breadth.
-The S&P 500 Index is 11.2% above its 200-dMA and
4.8% above its 50-dMA. This market is overly
stretched, a bearish sign.
- The Calm-Before-the-Storm indicator continues to warn
that the stock market is too calm. A 1-2%, one-day drop is expected when the
market breaks. Usually, that happens within a month of the signal.
-Cyclical Industrials are under-performing the S&P
500. This can suggest that investors are worried.
-The Index had been outperforming the Utilities ETF (XLU)
over the past 2-months, but XLU has been catching up to the Index dramatically over
that period and now it is even with it. This is a bear sign.
-Overbought/oversold Index is overbought.
NEUTRAL
-Sentiment is very high, but not yet in the red zone.
-RSI – elevated but not a sell yet.
-Breadth vs the S&P 500 index indicates that the
Index was too far ahead of most stocks on the NYSE recently. Now, this indicator
has slipped out of the danger zone, but since it was bearish not long ago, we
need to be very watchful.
-There have only been 6 down-days over the last month. This
isn’t a bear sign yet, but if it continues higher, we’ll get a sell signal on
this indicator soon.
-VIX is falling. But we’d rather see it falling faster to
give a bullish sign.
BULL SIGNS
-MACD of S&P 500 Price is bullish.
-My Money Trend indicator is advancing.
-The advance continues to broaden. 11.7% of issues on the NYSE made new 52-week
highs at today’s new all-time high for the S&P 500. This is well above the 5-year average for
this stat.
-New-highs are moving higher.
-Smart Money (late-day-action) is moving higher.
-Up moves have been bigger than down moves over the last
month.
-The 5-10-20 Timer is bullish; the 5-dEMA and the 10-dEMA
remain above the 20-dEMA of the S&P 500.
-My long-term volume indicator (a variant of on-balance-volume)
is bullish.
-The short-term Fosback High-Low Logic Index is close to
giving a buy signal.
I remain bullish in the
long-term; short-term, I‘ve been expecting a pullback, but it has been slow to
develop. One wonders if perhaps we’ll get to February before we see a dip.
February is when the FED will begin reducing its “repo” operations. For now, I think we'll see more bear signs before the markets turn down.
Any pullback should be small (about 3-5%): the number of
new, 52-week highs has been increasing when the S&P 500 has been making
each new high, today included. Also, 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 16
January (The S&P 500 is too far above its 200-dMA when sentiment is
considered and Bollinger Bands are overbought.)
(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)
*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.
FRIDAY 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
Friday, the PRICE and VOLUME indicators were
Bullish; VIX and SENTIMENT Indicators were neutral. Overall, the Long-Term
Indicator improved to BUY.
A BUY now doesn’t mean much; the important BUY signal was
last October. We expect a better buy opportunity later.
