RETAIL SALES (Reuters)
“U.S. consumer spending appears to have slowed further in
January, with sales at clothing stores declining by the most since 2009, which
could raise concerns about the economy’s ability to continue expanding at a
moderate pace…Retail sales excluding automobiles, gasoline, building materials
and food services were unchanged last month.” Story at…
INDUSTRIAL PRODUCTION (MarketWatch)
“Industrial production fell 0.3% in January, marking the
fourth decline in the past five months, the Federal
Reserve reported Friday...However, the closely watched ISM factory
index rose over the break-even 50 level for the first time in five months in January.”
Story at…
MICHIGAN SENTIMENT (Business Insider)
“American consumers were increasingly optimistic about
the economy this month despite a deadly viral outbreak across at least two
dozen countries. The University of Michigan said Friday its key
measure of consumer sentiment jumped to 100.9 in early February…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.2% to 3380.
-VIX slipped about 3% to 13.68.
-The yield on the 10-year Treasury slipped to 1.588.
It’s Friday so it’s time for a run-down of Bull/Bear
signs:
BEAR SIGNS
-Cyclical Industrials are underperforming the S&P 500
and Utilities are outperforming the Index, both suggesting investors are worried.
-The S&P 500 is too far above its 200-dMA when
sentiment is considered. As of today, it is 11.5% above 200-day moving average.
As previously discussed, this is rarified bear-air.
-Breadth vs the S&P 500 index is very close to the
bear side as it indicates that the Index is too far ahead of most stocks on the
NYSE. This isn’t giving a bear signal yet, but it’s close. This is an important
signal that has a good record of calling tops. It signaled a top in December;
that was the first wrong call in 5 tries over the past 3 years.
-New-high/new-low data is falling.
-Overbought/Oversold Index, a measure of advance-decline
data, is overbought. This signal can be very early so I don’t pay much
attention to it.
-As of today, Friday, there have been only 2 days down
over the prior 10 trading-days; this suggests that we are due for some down days
next week. If we were to get to only 1 down day in the last 10 it would be a
very bearish sign. For now, we have a mildly bearish signal.
NEUTRAL
-RSI in the mid-zone solidly neutral.
-Bollinger Bands are elevated, close to a bearish signal,
but remain neutral.
-Statistically, the S&P 500 is neutral.
-Sentiment is extremely elevated, but it is not giving a
sell signal.
-VIX has been bouncing up and down.
-The Fosback High-Low Logic Index is neutral.
BULL SIGNS
-Money Trend is headed up – a bullish sign.
-MACD of S&P 500 price is bullish.
-MACD of S&P 500 stocks advancing on the NYSE is
bullish.
-The 5-10-20 Timer is BUY, because the 5-dEMA and the
10-dEMA are above the 20-dEMA.
Overall we see the following…
The daily sum of 20 Indicators improved from +2 to
+3 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from -10 to +4. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
Based on the overstretched S&P 500, I am 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 14
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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 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
Friday, the VOLUME indicator is bullish; VIX, PRICE, and
SENTIMENT Indicators were neutral. The Long-Term Indicator is HOLD.
