“U.S. producer prices dropped by the most in more than
two years in December as the cost of energy products and trade services fell,
adding to signs of tame inflation that may allow the Federal Reserve to be
patient about raising interest rates this year.” Story at…
EMPIRE STATE MANUFACTURING (MarketWatch)
“The Empire State manufacturing index fell 7.6 points to
3.9 in January, the lowest reading in more than a year, the New York Federal Reserve said Tuesday.”
Story at…
BULL OR BEAR (Real Investment Advice)
“…there is enough of a bullish case being built to
warrant taking some equity risk on a very short-term basis. However, the
longer-term dynamics are clearly bearish. When those negative price
dynamics are combined with the fundamental and economic backdrop, the “risk” of
having excessive exposure to the markets greatly outweighs the potential “reward.
Could the markets rocket higher as some analysts currently expect? It is quite
possible particularly if the Federal Reserve reverses course and becomes much
more accommodative. For now, the upside remains limited to roughly 80 points as
compared to 230 points of downside.
Those are odds that Las Vegas would just love to give
you.” – Lance Roberts. Commentary at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 1.1% to 2610.
-VIX slipped about 2% to 18.60.
-The yield on the 10-year Treasury rose to 2.718%.
My measure of Money Trend has stalled after making an
all-time high (based on 8-years of data) and that’s a bearish sign. (This
indicator attempts to follow the general concept of Lowry Research and their
supply and demand methodology for stock market analysis. Their concept is based
on a detailed stock-by-stock analysis while mine is an estimate based on
readily available Macro data. Theirs is
much more accurate, but that doesn’t mean mine isn’t useful.)
50-dMA is now 2631 so the S&P 500 is less than 1%
below this important line of resistance.
RSI, (SMA-14) turned negative today at 81. Bollinger Bands are not bearish yet, but they
are close. I tend to use these two indicators in tandem so we don’t see a
bearish sign yet.
Relative Strength measures the size of up-moves vs.
all-moves on a 14-day moving average basis and presents the result as a
percentile. For example; if the RSI is 85, it means that the size of up-moves
are in the 85th percentile when compared to all moves over the 14-day
period. If ALL moves had been up, RSI would be 100 – a definite short term
sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to
the upside) and 80 is overbought. If the up-moves and down-moves are equal in
size over the 14-day period, RSI would be 50.
My daily sum of 17 Indicators dropped from +7 to +6 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +75 to +78.
Since a retest of the prior low at 2351 is likely, I sold
the rally and cut my stock holdings back to about 30%, 9 January. I did this to reduce risk. There is a possibility that this “correction”
could be the bear market crash some have been anticipating for several years.
The issue us simple: only a retest at the 2351 level, or a climb back above the
old highs (not likely without a retest), will tell us whether 2351 was THE
bottom.
MOMENTUM ANALYSIS:
(Momentum analysis is suspect in a selloff, so I‘d be
careful using momentum data for the time being – the only reason utilities are
highly ranked among ETFs is as an alternative to stocks during the correction.) The same is true for individual stocks in the
Dow 30.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. (In this case -100%
since all are negative.) 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.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
NEUTRAL on the market. (Up-volume has been slipping on a smoothed 10-day
basis.)
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).
My current stock allocation is about 30% invested in
stocks on as of 9 January 2019. For me, fully invested is a balanced 50% stock
portfolio so this is a very conservative position.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the
Sentiment and Volume indicators were positive; The Price and VIX indicators
were neutral. Overall this is a POSITIVE indication, BUT IT MAY BE TOO EARLY to
Buy now since we expect a retest of the low.
It does indicate that conditions have greatly improved. Bullish
Sentiment is based on the short-term version of this indicator. The longer-term version is neutral for
Sentiment.
