JOBLESS CLAIMS (MarketWatch)
The number of Americans who applied for unemployment
benefits in late January fell slightly and gave no hint of rising layoffs,
indicating the labor market remains very robust. Initial jobless claims
declined by 7,000 to 216,000 in the seven days ended Jan. 25…” Story at…
GDP-ADVANCE (NYTimes)
“Gross domestic product — which measures the value of
goods and services produced inside the United States — grew at a 2.1 percent
annual rate between October and December, the same as the previous three
months, according to preliminary
data released by the Commerce Department on Thursday…Year-over-year
growth was 2.3 percent in 2019, compared with 2.5 percent a year earlier.”
Story at…
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“…the only way to cure all this giddiness and greed is
with at least a short, sharp pullback. Trading ranges rarely create enough of a
scare. Over the next few months, stocks could take two paths to repair
sentiment. First, the bounce since Monday’s low could peter out sooner than
later with another leg down in February to clean everything up. Or, stocks
could be entering a multi-week or month trading range that ultimately breaks to
the downside later in Q1.” Commentary at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dipped about 0.3% to 3284.
-VIX dropped about 5% to 15.49.
-The yield on the 10-year Treasury was little changed at 1.588.
The S&P 500 tested Monday’s prior low in the morning;
all afternoon the action was bullish with a strong move up into the close. Has the market shrugged off over-stretched
conditions and the corona-virus? Maybe.
CNBC said the bounce up was caused by the World Health Organization
declaration that the coronavirus is a “Public Health Emergency.” I don’t see
how that is going to solve the economic risks, but investors seem to think it
will, at least based on today’s market action.
Internals were a bit off today. We saw a huge number for unchanged
volume. This is thought by some to be a
sign of investor confusion seen when the market changes direction. While this seems logical, I’ve never been able
to develop an indicator based on this stat because most of the time, high
unchanged volume doesn’t seem to mean anything. Still, sometimes it’s correct; I went back to
11 September of 2019 to find an unchanged volume higher than today’s. That was the day before the top of a 13%
pullback.
Another odd number in the market internals was the high number
of new 52 week-highs and a high number of new 52-week lows. Today, new-highs
were 179 and new-lows were 111. In a
healthy market they are not usually both high.
It’s only one day of data, so we won’t worry yet, but this is the idea
behind the Fosback Hi-Lo Logic Indicator.
It has jumped from a bullish low to leaning to the bear side. It isn’t
bearish yet, but I was surprised how quickly this indicator has moved.
Utilities outpaced the S&P 500 today 0.93% to 0.31%. Utilities
have outperformed the Index over the last 2-months too. That’s not a sign of a
healthy market.
Overall, indicators are not optimistic. The daily sum of
20 Indicators improved from -12 to -8 (a positive number is bullish;
negatives are bearish). The 10-day smoothed sum that negates the daily
fluctuations dropped from -11 to -27. (These numbers sometimes change
after I post the blog based on data that comes in late.) Most of these
indicators are short-term.
Down still seems most likely for the short-term, but I
have less conviction now.
Major support levels are:
-50-dMA, now at 3209
-100-dMA, now at 3108
-200-dMA, now at 3010
It is very unlikely that any retreat would be lower than
the 200-dMA.
It seems unlikely that the market will shrug off the
coronavirus scare this week or next, but it might. Markets rarely listen to me. I’ll just watch the indicators and we’ll see
if they improve. So far, they haven’t moved much.
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 29
January (The S&P 500 was 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)
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
- I cut my Apple (AAPL) position in half Monday, but I
still own a large position in AAPL.
- I cut my XLK position in half Monday, but I still own a
large position in XLK.
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
NEGATIVE / BEARISH 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 45% invested in
stocks as of 27 January (down from 60%). This is a conservative 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 VIX, PRICE, VOLUME and SENTIMENT Indicators
were neutral. Overall, the Long-Term Indicator remained HOLD.
