PERSONAL INCOME / SPENDING (WSJ)
“Consumer spending eased at the end of last year, part of
a trend of steady but slower spending gains that lead to the smallest annual
increase since 2016. Personal-consumption expenditures, or household
spending, rose a seasonally adjusted 0.3% in December from
November, the Commerce Department said Friday. Personal income also advanced
0.2% last month.” Story at…
PCE PRICES (fxstreet)
“Inflation in the United States, as measured by the
Personal Consumption Expenditures (PCE) Price Index, rose 0.3% on a monthly
basis in December…On a yearly basis, the PCE Price Index came in at 1.6%...”
Story at…
CHICAGO PMI (MarketWatch)
“Manufacturing activity in the Midwest sank in January to
the lowest level since December 2015, according to a survey of businesses released
Friday by MNI Indicators. The Chicago Purchasing Managers Index fell
to 42.9 this month…” Story at…
MICHIGAN SENTIMENT (CNBC)
“The University of Michigan’s consumer sentiment index
came in at 99.8 for January… “The resilience of consumers is remarkable and due
to record low unemployment, record gains in income and wealth, as well as near
record lows in inflation and interest rates,” said Richard Curtin, Surveys of
Consumers chief economist, in a statement.” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 1.8% to 3226.
-VIX jumped about 22% to 18.84.
-The yield on the 10-year Treasury dropped to 1.509.
As we suspected, the World Health Organization declaration
yesterday that the coronavirus is a “Public Health Emergency” didn’t exactly settle
the markets, so it is not surprising that indicators were more bearish today.
The daily sum of 20 Indicators declined from -8 to
-11 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations dropped from -27 to -45. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
The S&P 500 closed 0.4% above its 50-dMA Friday. Investors
are likely to worry over the weekend and sell on Monday. Further, most corrections include a “waterfall
phase” where prices fall nearly straight down, so I doubt that we have seen the
last of this dip. For smaller corrections (and we hope that is what we are
seeing) the average fall from top to bottom takes about 35 trading sessions. Today
was day 9.
Major support levels are:
-50-dMA, now at 3211
-100-dMA, now at 3110
-200-dMA, now at 3012
It is very unlikely that any retreat would be lower than
the 200-dMA.
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 30
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:
During corrections momentum analysis may not be useful.
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.
FRIDAY 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
Friday, the VOLUME and Panic Indicator were
negative; VIX, PRICE, and SENTIMENT Indicators were neutral. Overall, the
Long-Term Indicator declined to SELL. This suggests a Defensive position is
appropriate, but I took a defensive position 4-trading sessions ago so there is
no action to take at this point.
