“Small business optimism ended the year historically
strong, with a reading of 102.7, down 2 points from November. Seven of 10
components fell, two improved, and one was unchanged. An increased number of
small business owners reported better business conditions and expect higher
nominal sales in the next three months…“December marked the end of another
banner year for the small business economy, as owners took full advantage of strong
consumer spending, and federal tax and regulatory relief,” said NFIB Chief Economist William
Dunkelberg. “2020 is starting out with a solid foundation for
continued growth, two-years into the Tax Cuts and Jobs Act that’s providing
fuel to grow small businesses and their workforce.” Press release at…
CPI (MarketWatch)
“Higher prices for gasoline, health care and rent spurred
another increase in the cost of living in December, capping off the biggest
annual advance in inflation in eight years. But price pressures more broadly
remained largely muzzled. The consumer-price index rose 0.2% last month, the
government said Tuesday. Economists polled by MarketWatch had forecast a 0.3%
advance.” Story at…
STOCKS RETREAT FROM HIGHS (MarketWatch)
“U.S. stocks traded lower Tuesday afternoon as doubts
about the extent of import tariff reductions in a trade deal with China saw
equities retreat from fresh intraday records for the benchmark indexes.” Story
at…
My cmt: Stocks dropped about 17points on the S&P 500
from roughly 1:30-2:00PM after the tariff news came out.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped about 0.2% to 3283.
-VIX rose about 0.6% to 12.39.
-The yield on the 10-year Treasury slipped to 1.816.
My daily sum of 20 Indicators remained +6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
sum that negates the daily fluctuations improved from -13 to -2 (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.
In addition, the Market Internals basket I track as a
short-term indicator improved from Neutral to Positive on the market. Not all
is great though…
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 this signal, but we just
went thru an extended warning period (5 Nov – 19 Dec) in which nothing happened.
I’ll be vigilant, but bullishness seems to have overcome this indicator for the
time being.
A number of other indicators are close to a top warning,
most notably, Bollinger Bands, RSI and Internals vs the S&P 500.
Today the S&P 500 closed 9.9% above its 200-dMA. The
10-15% zone is where we usually see a pullback and often at the lower end of
that range.
I remain bullish in the long-term; short-term, it looks
like we are in for a bit of a pullback - but I’m no longer trying to short it. Perhaps
we’ll get thru January before we get a dip.
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: -1
Most Recent Day with a value other than Zero: -1 on 13
January (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:
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.
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to 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
Tuesday, the PRICE indicator was Bullish; VIX,
VOLUME and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator
remained to HOLD.
