RETAIL SALES (Bloomberg)
“U.S. retail sales fell in February by the most in a
year, indicating the main driver of the U.S. economy, consumer spending, had
begun to slow even before coronavirus containment measures began rippling
through the economy. The value of overall sales decreased 0.5% from the prior
month after a 0.6% gain in January…” Story at…
INDUSTRIAL PRODUCTION (MarketWatch)
“Industrial production was strong just before the
coronavirus outbreak, data from the
Federal Reserve showed Tuesday. Industrial rose 0.6% in
February…” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 6% to 2529.
-VIX slipped about 8% to 75.91.
-The yield on the 10-year
Treasury rose to 1.083. (It’s been about 2 weeks since we saw a yield that high,
and that may be a bullish sign for stocks.)
In the past 15 years or so, corrections greater than 10%
have lasted 68 days top to bottom. We’re
at day 18 in the correction and the S&P 500 is now 25.3% below its all-time
top, on 19 Feb. It is 17% below its 200-dMA.
Monday was day 18 of the selling-stampede so the timing
is right for an end today, Tuesday. They usually last 17-25 sessions. Today
looks like it was a Turning Tuesday, i.e., a short-term end to selling and a
bounce appears to be underway. Unfortunately, there is nothing in my data
to confirm this guess. The Fosback High-low Logic Index is getting close to a Buy,
but has not issued a buy signal yet. A number of other indicators remain
oversold, but they can stay that way a long time. In other words, we may
restart selling Wednesday.
If Tuesday was the end of the waterfall selloff, it would
be encouraging. The waterfall-low is
often very close to the final bottom, but we won’t know until we have a retest. In these big, crash-selloffs, the time until
a retest is usually measured in months and that retest can be in the form of a
lower-low (hopefully) or sometimes a higher-low. (A higher-low is harder to
call.)
It still seems to me that we’ll get over this event
faster; because of that, I bought some Intel today as a long-term position, if
I am patient. (If not, it may turn into a trade…we’ll see.) Intel dropped to around
44 yesterday. That has been a base for Intel going back to December 2017. Intel
also has a low PE and that is important on a correction/crash.
As noted, perhaps we are bouncing upward. If so, we
retraced 14% toward the old highs today. A normal retracement would be in the
range of 40-60%, before the markets begin falling again.
Overall, the daily sum of 20 Indicators improved
from -11 to -9 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations remained -94. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
No bottom is indicated, but perhaps yesterday may have
been a short-term bottom.
We’ll need to see a retest or Bullish signs in Volume or
Breadth to sound the all-clear for a final bottom.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +4**
Most Recent Day with a value other than Zero: +4 on 17 March.
(The S&P 500 Index is too far below the 200-dMA when sentiment is included;
Breadth has made a bullish divergence from the S&P 500; Money Trend has
made a bullish divergence from the Index; and Smart Money {late-day-action} is
oversold.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
**The Top/Bottom indicator continues to give
extreme oversold readings, but as I have been saying, we won’t know when we
have a bottom until we have a successful retest, or a reversal buy-signal from
Breadth or Volume.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%; in this case, -100%
because the market has been so bad. 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…
TUESDAY 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 40% invested in
stocks as of 3 March. (I previously dropped stock allocations to 45% on 27
January). You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the PRICE indicator is bullish; the VOLUME and
VIX indicators gave bear signals. The SENTIMENT Indicator was neutral. The Long-Term
Indicator remained SELL. The important sell signal was 24 February and I sold
before that due to other signals.
