KANSAS CITY FED SURVEY (Advisor Perspectives)
“Regional factory activity was down only slightly in
January, and firms reported a modest increase in employment,” said Wilkerson.
'Contacts reported slightly less difficulty finding workers than six months
ago, but still over 60 percent of firms were experiencing labor shortages'…Let's
compare all five Regional Manufacturing indicators. Here is a three-month
moving average overlay of each since 2001 (for those with data).”
Analysis and more charts at…
CORONAVIRUS (CNN)
“82 people are dead and more than 2,700 cases have been confirmed in mainland China, as the Wuhan coronavirus continues to spread throughout Asia and
the rest of the world…People can spread the virus before symptoms show, China's
health minister said Sunday, complicating efforts to contain the outbreak.
My cmt: One
wonders how many people have traveled from Wuhan province to the US. I would
expect the numbers to be very small. As
a result, I am impressed by the fact that so many cases are showing up on the
US. Now there has been a death in
Beijing. I don’t want to get too wound up over this; it just seems to me that
markets will be in flux until we get a lot more information.
IGNORE THE FAKE CLIMATE DEBATE (WSJ)
“Beyond the headlines and social media, where Greta
Thunberg, Donald Trump and the online armies of climate “alarmists” and
“deniers” do battle, there is a real climate debate bubbling along in
scientific journals, conferences and, occasionally, even in the halls of Congress.
It gets a lot less attention than the boisterous and fake debate that dominates
our public discourse, but it is much more relevant to how the world might
actually address the problem. In the real climate debate, no one denies the
relationship between human emissions of greenhouse gases and a warming climate.
Instead, the disagreement comes down to different views of climate risk in the
face of multiple, cascading uncertainties….the world is unlikely to cut
emissions fast enough to stabilize global temperatures at less than 2 degrees
Celsius above pre-industrial levels, the long-standing international target,
much less 1.5 degrees, as many activists now demand. But recent forecasts also
suggest that many of the worst-case climate scenarios produced in the last
decade, which assumed unbounded economic growth and fossil-fuel development,
are also very unlikely…continuing political, economic and technological
modernization, not a radical remaking of society, is the key to both slowing
climate change and adapting to it.” -
WSJ
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 1.6% to 3244.
-VIX jumped about 25% to 18.23.
-The yield on the 10-year Treasury slipped to 1.610.
Markets have been stretched for some time as we have previously
noted here. My calm-before-the-storm indicator warned through most of Nov-Dec
and again from 13 Jan to 24 Jan. Now it has morphed into a panic indicator as
statistically the marked volatility has jumped up significantly. As a result,
we would expect to see further declines in stock markets; I don’t see the
concerns over the coronavirus going away overnight. Good earnings would go a
long way to calm fears, but forward-looking statement may not be as optimistic
as the numbers. Perhaps companies have
much better information than the news media, but I doubt it.
It seems unlikely that the disease will be a major
problem in the US, but it could affect production in China as well as the
Chinese economy – both could affect US stock prices.
I had hoped that we would see a valuation top where we
would get a clear sell-signal warning from the indicators.
That wasn’t to be, as news has once again trumped technicals.
As we noted last week, today was a statistically
significant down-day. That just means that the price-volume move exceeded my
statistical parameters. Statistics show that a statistically-significant,
down-day is followed by an up-day about 60% of the time. We could see some choppy
movement before the market decides where it wants to go. Down seems most likely for the short-term.
The daily sum of 20 Indicators slipped from -5 to
-13 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations dropped from +40 to +25. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I remain bullish in the
long-term; short-term, the dip is here.
The coronavirus will worry
markets until we get a better handle on its impacts.
I have been suggesting that any pullback should be small
(about 5%). The evidence to support that is two-fold: (1) the number of new,
52-week highs has been increasing when the S&P 500 has been making new-highs;
(2) the Fosback New-High/New-Low Logic Index remains much closer to a buy than
a sell. We can be a little more concerned now that we have a news driven
decline – the news can always get worse driving markets lower.
Major support levels are:
-50-dMA, now at 3199
-100-dMA, now at 3098
-200-dMA, now at 3005
It is very unlikely that any retreat would be lower than
the 200-dMA.
I took some money off the table by cutting stock
allocations. Going forward, we will be trying to identify a buying opportunity…assuming
this dip continues. If I am right, that could be a few weeks out.
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 24
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)
-Apple (AAPL) reports 28 January. I cut my Apple position
in half, but I still own a large position in AAPL.
- I cut my XLK position in half, 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.
MONAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to 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
Monday, the VIX indicator was bearish; PRICE, VOLUME
and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator
remained HOLD.
