CONSUMER CONFIDENCE (Reuters)
“U.S. consumer confidence edged up in February,
suggesting a steady pace of consumer spending that could support the economy
despite growing fears over the impact of the fast spreading coronavirus, which
have roiled financial markets. The Conference Board said its consumer
confidence index ticked up to a reading of 130.7 this month…” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 3 % to 3128.
-VIX jumped up about 11% to 27.85.
-The yield on the 10-year Treasury fell to 1.354.
Bullish signs? Bollinger Bands and RSI are both giving oversold
buy-signals. We may see a bounce tomorrow, but the pullback is not likely to be
over.
Overall, the daily sum of 20 Indicators improved slightly
from -14 to -12 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations declined from -16
to -31. (These numbers sometimes change after I post the blog based on data
that comes in late.) Most of these indicators are short-term.
As of today, the Index is 7.6% off of its recent high and
we’ve seen back-to-back, down-days of 3% and 3.4%. In Oct 2018, the market
bounced up after 2 similar back-to-back drops.
That bounce lasted about 4 days before selling picked up again. We can guess
that we might see something similar this time.
The “average” correction has been 12% since 2009 per my
records. Carter Worth, technician for Cornerstone Macro, reported on CNBC yesterday
that the average pullback has been 12% since 1927 so my smaller sample is ok.
Actually, I prefer more recent stats since they show what is happening…duh…more
recently.
My data shows that corrections greater than 10% have lasted, on average,
68 days top to bottom; those less than 10% have lasted 35 days. We’re at day 4.
My revised correction guess (made Monday) was that a drop
of 8-15% may be a reasonable guess for S&P 500 declines.
Some support levels follow:
4 December low:3093
Current S&P 500 200-day Moving Average: 3045
8 October low: 2893
A buying opportunity is pretty far off, based on prior
lengths of pullbacks, but the S&P 500 may be closer to a bottom than the
top.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +2
Most Recent Day with a value other than Zero: +2 on 25
February. (Bollinger Bands and RSI were bullish.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines. For example, while Apple is still number 2 in momentum, it has gained
zero over the last 2 months.
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.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEGATIVE 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 based on an overstretched S&P 500. You may wish
to have a higher or lower % invested in stocks depending on your risk
tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the VOLUME, VIX, PRICE and PANIC Indicators gave
bear signals; The SENTIMENT Indicator was neutral. The Long-Term Indicator remined SELL. If you wish
to reduce equity exposure, sell on a bounce upward. Perhaps a bounce will start
tomorrow. There is a risk is that stocks
continue to fall in a waterfall slide downward.
If that happens it may be best to ride it out. We are probably closer to the bottom than the top, if the averages are to be
believed.
