AUTO SALES (TheDrive)
“Auto sales in the U.S. are slumping, and it appears that
this is just the beginning of a major downturn for automotive sales across the
board, if a new report is to be believed. According to a study by J.D. Power
and LMC Automotive, the industry will enter its fifth consecutive year of
decline in 2020, and there aren't indications of it getting better anytime
soon…”
ISM MANUFACTURING (CNBC)
“The Institute for Supply Management (ISM) said on Monday
its index of national factory activity increased to a reading of 50.9 last
month, the highest level since July, from an upwardly revised 47.8 in December.”
Story at…
CONSTRUCTION SPENDING (SeattleTimes)
“Spending on U.S. construction projects edged down a
slight 0.2% in December, closing out a year when total construction registered
its first annual decline in eight years.” Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3249.
-VIX dropped about 5% to 17.97.
-The yield on the 10-year Treasury rose to 1.543.
Quick post tonight – it was a busy day.
The daily sum of 20 Indicators declined from -11
to -13 (a positive number is bullish; negatives are bearish). It’s usually not
a good sign to see indicators fall on a positive day. The 10-day smoothed sum
that negates the daily fluctuations dropped from -45 to -66. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I thought Monday would be a down day, but it didn’t
follow the script. Still, it doesn’t look like the dip/pullback/whatever is
over. For smaller pullbacks (5-10% - and we hope that is what we are seeing)
the average fall from top to bottom takes about 35 trading sessions. Today was
day 10. Many of our indicators are trend following so in very small dips, say
5%, we don’t get a good buy signal. It is possible that the dip is over, but
the evidence pints to a higher likelihood of more downside ahead.
We also note that one of our topping indicators is again very
close to giving a warning sign. The S&P 500 is nearly too far above its
200-dMA when sentiment is considered.
Major support levels are:
-50-dMA, now at 3214
-100-dMA, now at 3113
-200-dMA, now at 3014
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)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF)
outperformed the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked
in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted
correctly.) XLK was up 35% on the year while the S&P 500 was up 18%.
*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.
For more details, see NTSM Page at…
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
Monday, the VOLUME and Panic Indicator were negative;
VIX, PRICE, and SENTIMENT Indicators were neutral. Overall, the Long-Term Indicator remained SELL.
This suggests a Defensive position is appropriate, but I took a defensive
position 27 December so there is no action to take at this point.
