“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire
JOBLESS CLAIMS (Marketwatch)
“The number of Americans who applied for unemployment
benefits at the end of January fell close to a postrecession low, signaling the
U.S. labor market is still rock solid despite stiffer economic headwinds. Initial
jobless claims declined by 15,000 to 202,000 in the seven days ended Feb. 1…”
Story at…
PRODUCTIVITY (AP News)
“U.S. productivity rebounded in the final three months of
last year, helping to boost productivity growth for the year to the best
showing in nearly a decade. The Labor Department’s Bureau of Labor Statistics
said Thursday that productivity grew at an annual rate of 1.4% in the
October-December quarter…” Story at…
HOW THE HOUSE LOST THE IMPEACHMENT (The Hill)
“Critics of the president simply do not want to hear that
the blind rush to impeach guaranteed not only an acquittal but an easy case for
acquittal. It is after all important for some members of the media to maintain
that fools dwell only in Republican red states. When I appeared before the House
Judiciary Committee in November…I warned the panel that it was rushing to a
failed impeachment by insisting on a vote by Christmas. This was the shortest
impeachment investigation in American history. It was also the narrowest
grounds and thinnest record for trial…With the approaching Iowa caucuses, they
chose a failed impeachment rather than taking a few more months to work on a
more complete case against Trump, a case more difficult to summarily dismiss.”
- Jonathan Turley, Shapiro
Professor of Public Interest Law for George Washington University. Full
commentary at
https://thehill.com/opinion/judiciary/481015-how-the-house-lost-the-witness-battle-along-with-impeachment
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.3% to 3346.
-VIX dropped about 1% to 14.96.
-The yield on the 10-year Treasury slipped to 1.643.
The S&P 500 fell at the open and retested yesterday’s
low before following through with a good positive close. Market internals were at
best neutral and bearish might be the better term. Declining-issues outpaced
advancing issues on the NYSE; declining-volume outpaced advancing volume as
well.
Before we saw any news, I had predicted a 3-5% dip. When the Chinese virus news came out, I
expected a bigger one. As of now, the dip
was 3.1% from the top. Dip over?
The market is now stretched again, though only one top
indicator is warning at this point as noted below in the “Top / Bottom
Indicator” section.
The S&P 500 is 3.7% above its 5-dMA and 10.8% above
its 200-dMA. Trouble zones are 3-3.5% and 10-15% above the respective moving
average; that’s what we mean by stretched. On the other hand, the S&P 500
has gotten as far as 20% above the 200-dMA before one top so we can’t panic at
this point especially since indicators are improving.
The daily sum of 20 Indicators improved from +1 to
+5 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from -79 to -74. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
One weird stat: “Stocks that closed up exactly four
consecutive days underperformed the benchmark 1-week later.” - Trading
Markets.com. We’ll see if this also
applies to the S&P 500 rather than just an individual stock.
I am inclined to wait another day or so before increasing
stock holdings. That’s based on the weak internals today since they usually
precede a down day. I am still a bit concerned about a possible reversal down. I
cut back from 60% invested in stocks to 45% invested in stocks. All I am doing
here is managing risk. As of today, my portfolio has underperformed the Index
by ½% since the low on 31 January.
In spite of my concern, I may still decide to increase
stock holdings tomorrow; if I do, I’ll post before Noon.
The 5-10-20 Timer is BUY as of Tuesday, because the
5-dEMA and the 10-dEMA are above the 20-dEMA.
That sends the long-term Indicator to BUY.
All indications are that the dip is over, but I am cautious.
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 6
February (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:
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE / BULLISH 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
Thursday, the VOLUME, VIX, PRICE, and SENTIMENT
Indicators were neutral. However, the 5-10-20 Timer signaled a BUY and that is
the default buy indicator for the long-term indicator. The Long-Term Indicator is BUY, but I am waiting
another day as discussed above.
