FOMC MINUTES (CNBC)
“Federal Reserve officials expressed confidence at their most recent meeting about the state of the U.S. economy and figured interest rates likely would remain unchanged for a while, according to minutes released Wednesday.” Story at...
https://www.cnbc.com/2020/02/19/fed-minutes-january-2020.html
“Federal Reserve officials expressed confidence at their most recent meeting about the state of the U.S. economy and figured interest rates likely would remain unchanged for a while, according to minutes released Wednesday.” Story at...
https://www.cnbc.com/2020/02/19/fed-minutes-january-2020.html
PPI (MarketWatch)
“U.S. producer prices increased by the most in more than
a year in January, boosted by rises in the costs of services such as healthcare
and hotel accommodation. The Labor Department said on Wednesday its producer
price index for final demand jumped 0.5% last month…” Story at…
HOUSING STARTS (MarketWatch)
“Construction on new homes slipped 3.6% in January, but
permits rose to a nearly 13-year high in a sign that builders plan to pick up
the pace in the spring.” Story at…
CASS FREIGHT INDEX (Cass Information Systems)
“[December] Shipment volumes dropped 7.9% vs
December 2018 levels, as the index posted its lowest reading since January
2018. It was also the steepest y/y decline since the Great Recession of
2008-2009.” Press release at…
WARNINGS ARE EVERYWHERE (Real Investment Advice)
“We’ve never seen this level of speculation before. Not
even close.” – Sentiment Trader.
“From a portfolio management standpoint, the markets are
very extended, and a correction over the next couple of months is highly likely. While
it is quite likely the year will end positive, particularly given the current
momentum push, taking some profits now, rebalancing risks, and using the coming
correction to add exposure as needed will yield a better result.” – Lance
Roberts. Commentary at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.5% to 3386.
-VIX dipped about 3% to 14.38.
-The yield on the 10-year Treasury rose to 1.581.
As previously reported, we note a concerning issue for
the Bulls. The S&P 500 is now 11.5% above its 200-dMA. There were only 3 periods when the S&P
500 reached this level in the last 8 years: (1) Jan of 2018, for about 9-days
before the top that preceded a 20% drop in the Index (2) May of 2013, 5-days
before the top that preceded a 6% drop. (3) April 2012, 6 days before the top that
preceded a 10% drop.
The only periods when this is not a good signal is after
a major crash-bottom, such as the low of the financial Crisis in March 2009. In
those cases, there is extreme buying and that is the correct action; exceeding the
200-dMA by a very large amount in 2009 was not a sell signal.
I considered whether the bottom of the 20% correction in
December 2018 was so extreme that extreme buying is an acceptable signal of
bullishness now, and not a warning to sell. I’ll look at this some more. For
now, it still looks like a bearish sign to me.
We haven’t seen enough other bull signals to cancel the stretched market.
Overall, we see the following…
The daily sum of 20 Indicators declined from zero
to -4 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from +17 to +19.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term. They look very weak now.
Not much change in my guess: Based on the overstretched
S&P 500, I am still expecting another dip – not huge, but perhaps in the
5-10% zone. (It could always be worse if we get bad news.) On the other hand,
the Index may continue to climb until we see RSI and Bollinger Bands give
negative signs – that may not take too long. We’ll see.
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 19
February (The S&P 500 was too far above its 200-dMA when sentiment is
considered.) Even without sentiment, the S&P 500 is 11.5% above its
200-dMA – that’s high too.
(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.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEUTRAL 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
Wednesday, the VOLUME indicator is bullish; VIX, PRICE,
and SENTIMENT Indicators were neutral. The Long-Term Indicator is HOLD.
