Durable Orders … GDP … Personal Spending … Univ of Michigan Sentiment … Stock Market Analysis… ETF Trading … Dow 30 Ranking

DURABLE GOODS ORDERS (MarketWatch)
"Orders for durable goods in November pointed to business equipment investment continued to slow in the fourth quarter. While orders rose 0.8% in November…“core capital goods” fell 0.6% in November…”  Story at

https://www.marketwatch.com/story/orders-for-durable-goods-rise-08-in-november-led-by-aircraft-2018-12-21

 

GDP (FoxBusiness)

"The U.S. economy slightly cooled its growth rate during the third quarter, with the gross domestic product (GDP) falling to 3.4 percent in a third reading on Friday…” Story at…

https://www.foxbusiness.com/economy/us-gdp-revised-slightly-lower-in-3q-at-3-4

 

PERSONAL SPENDING (Bloomberg)

"The latest data on personal spending shows that consumers are not cutting costs, which will ensure the sector will remain the backbone of economic growth going into 2019. Fed policy makers will watch inflation developments very closely as the core gauge hovers around their projections for next year.” - Yelena Shulyatyeva and Carl Riccadonna, Bloomberg Economics. Story at…

https://www.bloomberg.com/news/articles/2018-12-21/consumers-increasingly-prop-up-a-u-s-economy-that-s-set-to-slow

 

MICHIGAN SENTIMENT (MarketWatch)

"The University of Michigan's consumer-sentiment gauge registered a final December reading of 98.3 vs. a preliminary reading of 97.5…"While the plunge in stock prices has recently garnered the most attention in the national press, consumers have focused more on their concerns about income and job prospects," said Richard Curtin, a University of Michigan economist…” Story at…

https://www.marketwatch.com/story/consumer-sentiment-index-rises-to-983-2018-12-21-1091226

 

MARKET REPORT / ANALYSIS         

-Friday the S&P 500 dropped about 1.6% to 2467.

-VIX rose 6% to 30.11.

-The yield on the 10-year Treasury slipped to 2.783%.

 

Today there was extreme volume (175% of the monthly average) due to mostly to options expiration so any inference from the day’s action is somewhat suspect.  There was no good news, other than to continue the mantra that every indicator I have remains oversold.

 

The number that jumps out? 52-week, new-lows, were again over 1000 with today’s number coming in at 1059. In 2015, the correction-bottom was 1-day after the new-low number was over 1000. So maybe today or Monday will be the low? We saw high new-low data yesterday too. The Wall St adage is “never on Friday.” That means downturns never end on Friday.  Investors will stew over the weekend and sell on Monday; the bottom is, more often than not, on Monday.  That sets up turn-around Tuesday, so we’ll look for early next week for a turn-around under the Christmas Tree.  Now for the bad news.

 

We just saw back-to-back days with new-lows over 1,000. In the past 10-years, that has only happened during the Financial Crisis and it didn’t happen near the bottom.  Let’s hope the options expiration today played a part in this rare event. 

 

My daily sum of 17 Indicators improved from -4 to -2 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations slipped from -40 to -41. The up-volume indicator switched to bullish, but that is an anomaly. As an absolute number, up-volume was up on today’s huge overall volume. On a percentage basis, up-volume does not look good and its chart would still be down. 

 

This is day 64 of this correction.  The Index is down 17.5% from its prior high. There have been 20 new-lows so far. Outside of the Financial Crisis, that has not happened in any correction over the last 10-years.

 

The average correction over the last 10-years (excluding major crashes) lasted 52-days. The average drop over that period was 12%. The longest correction in the last 10-years was the 19% drop in 2011. It took 108-days to complete, top to 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%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

FRIDAY MARKET INTERNALS (NYSE DATA)

Market Internals switched to Neutral on the market, but that is due to the up-volume anomaly I mentioned previously so I’ll ignore it for now. I don't think Internals have improved today.

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). 

 

I increased stock allocations to 60% invested in stocks on 27 November. I bumped up stock investments to 65% on 19 December. Both increases were made at technical bottoms or shortly thereafter. For me, fully invested is a balanced 50% stock portfolio so this is higher. The failure of technical bottoms has been disappointing, to say the least.

 

INTERMEDIATE / LONG-TERM INDICATOR

Friday, the VIX and Volume indicators were negative; Price and Sentiment were neutral. Overall this is a NEGATIVE / SELL indication. The concern is that the important sell-signal was last October. The NTSM long-term system can give sell signals near a bottom too. For the next day or two, I am ignoring this indication.

Jobless Claims … Philadelphia FED … Leading Economic Indicators … Stock Market Support Levels … Stock Market Analysis… ETF Trading … Dow 30 Ranking

JOBLESS CLAIMS (Marketwatch)

“The number of Americans losing their jobs and applying for unemployment benefits rose modestly in mid-December after dropping sharply to a 12-week low. The gain puts claims at the low end of their recent range around the 220,000 line.” Story at…

https://www.marketwatch.com/story/jobless-claims-rise-modestly-after-hitting-12-week-low-2018-12-20

 

PHILLY FED (MarketWatch)

“The Philadelphia Fed manufacturing index in December fell to a seasonally adjusted reading of 9.4, from 12.9 in November to reach the lowest level since August 2016.” Story at…

https://www.marketwatch.com/story/philly-fed-manufacturing-index-in-december-weakens-to-more-than-two-year-low-2018-12-20

 

LEI (PRNewsWire)

“The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.2 percent in November to 111.8 (2016 = 100), following a 0.3 percent decline in October, and a 0.6 percent increase in September.

 

"The LEI increased slightly in November, but its overall pace of improvement has slowed in the last two months," said Ataman Ozyildirim, Director of Economic Research at The Conference Board. "Despite the recent volatility in stock prices, the strengths among the leading indicators have been widespread. Solid GDP growth at about 2.8 percent should continue in early 2019, but the LEI suggests the economy is likely to moderate further in the second half of 2019."

https://www.prnewswire.com/news-releases/the-conference-board-leading-economic-index-lei-for-the-us-increased-slightly-in-november-300769578.html

 

STOCK MARKET TARGETS (RealInvestmentAdvice)

“Assuming today’s [Wednesday’s] breakdown remains intact, 2,100 (the 2015 and 2016 highs) is the next price target and support level to watch.” Jesse Columbo.

Chart and commentary at…

https://realinvestmentadvice.com/a-major-technical-breakdown-just-occurred-in-stocks/

My cmt: There are additional support levels at 2400 and 2450. If that doesn’t hold, the major support is the 2100 level shown above.

 

MARKET REPORT / ANALYSIS         

-Thursday the S&P 500 dropped about 1.6% to 2467.

-VIX jumped 11% to 28.38.

-The yield on the 10-year Treasury slipped to 2.810%.

 

Today, 1271 stocks made new 52-week lows on the NYSE. I looked back at the records.  There were only a few times when there was a higher number over the last 10-years. Several were in the middle of the Financial crisis.

 

In August 2015 there were about 1250 new-lows the day before the correction ended. That hasn’t been the norm though.  In 2010 and 2016 (16% and 14% corrections respectively) the highest new-lows were around 1300 and in occurred 8-weeks and 3-weeks before the final correction-bottom. In both cases though, there was a significant bounce up before the final low. That bounce started immediately after the high new-low number.

 

We are either near a bottom…or not. We don’t get much help from looking at the new-low data, but it does support that a bounce is likely soon.

 

My track record in this correction has been pretty bad though.  The normal technical analysis I use to call a bottom has failed three times...and let’s not even talk about the failed triple bottom.    

 

My daily sum of 17 Indicators improved from -5 to -4 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations remained unchanged at -40. 

 

Every overbought/oversold indicator I have remains oversold and some indicators are hinting at a turn.

 

This is day 63 of this correction.  The Index is down 15.8% from its prior high. The average correction over the last 10-years (excluding major crashes) lasted 52-days. The average drop over that period was 12%. The longest correction in the last 10-years was the 19% drop in 2011. It took 108-days to complete, top to bottom.

 

After the Fed debacle yesterday (a 3% swing to the downside after the FED announcement), I said the only advice I have is to wait for cooler heads to step in over the next day or two. They weren’t here today. I’ll hang on longer.

 

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%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Negative 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). 

 

I increased stock allocations to 60% invested in stocks on 27 November. I bumped up stock investments to 65% on 19 December. Both increases were made at technical bottoms or shortly thereafter. For me, fully invested is a balanced 50% stock portfolio so this is higher. The failure of technical bottoms has been disappointing,  to say the least.

 

INTERMEDIATE / LONG-TERM INDICATOR

Thursday, the VIX and Volume indicators were negative; Price and Sentiment were neutral. Overall this is a NEGATIVE / SELL indication. The concern is that the important sell-signal was last October. The NTSM long-term system can give sell signals near a bottom too. For the next day or two, I am ignoring this indication.

FOMC (FED) Rate Decision … Existing Homes Sales … Crude Inventories … Stock Market Analysis… ETF Trading … Dow 30 Ranking

FED (CNBC)

“Stocks plummeted through lows of the year and investors flocked to bonds after the Fed failed to sound like it was easing off its tighter policy path as much as markets had expected. The Fed raised interest rates by a quarter point, as expected, and lowered its median rate forecast to two hikes from three next year.” Story at…

https://www.cnbc.com/2018/12/19/fed-delivers-.html

 

EXISTING HOME SALES (Reuters)

“U.S. home sales unexpectedly rose in November, but recorded their biggest annual decline in 7-1/2 years [on a year-over-year basis] as the housing market remained mired in weakness amid higher mortgage rates which have made home purchases more expensive.” Story at…

https://www.reuters.com/article/us-usa-economy-housing/u-s-existing-home-sales-unexpectedly-rise-in-november-idUSKBN1OI1QL

 

CRUDE INVENTORIES (OilPrice.com)

“Amid plunging oil prices pressured by the double weight of U.S. production and global economic growth projections, the Energy Information Administration

reported a crude oil inventory draw of 500,000 barrels for the week to December 14, after a weekly draw of 1.2 million barrels a week earlier.” Story at…

https://oilprice.com/Energy/Energy-General/Oil-Prices-Rise-On-Small-Crude-Draw.html

 

MARKET REPORT / ANALYSIS         

-Wednesday the S&P 500 dropped about 1.5% to 2507.

-VIX was unchanged at 25.58.

-The yield on the 10-year Treasury slipped to 2.782%.

 

My daily sum of 17 Indicators improved from -7 to -5 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations dropped from -35 to -40.  RSI and Bollinger Bands both switched to oversold, a buy indication, and that’s why there was a slight improvement in the daily numbers. Every overbought/oversold indicator I have is now oversold.

 

This is day 62 of this correction.  The Index is down 14.5% from its prior high. The average correction over the last 10-years (excluding major crashes) lasted 52-days. The average drop over that period was 12%. The longest correction in the last 10-years was the 19% drop in 2011. It took 108-days to complete, top to bottom. Now to discuss this mess…

 

Let me get this straight…the S&P 500 dropped over 1.5% today and the VIX was unchanged?  I know it’s options expiration this week, but this still seems really odd. The Options Boys are as confused as I am! Let’s review.

 

The FED did exactly what I expected.  They raised rates – it was widely expected – and said they expect to raise rates only twice next year instead of three times as had been previously telegraphed. That seems like good news.  Apparently, that wasn’t what everyone else expected; the markets wanted more and we saw a drop in the S&P 500 from 2575 before 2PM (when FED minutes were released) down to 2490 before closing higher. That’s a drop of 3% on reasonably good (but apparently not good enough) news. 

 

To make matters more confusing, we made a technical bottom Tuesday and the market had been up more than 1% before the FED meeting. Inexplicably, the FED announcement seems to have been a major surprise.

 

I said yesterday I thought we made a bottom at 2546. Now, the only advice I have is to wait for cooler heads to step in over the next day or two to give us some idea what the bleep is going on.  

 

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%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

WEDNESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Negative 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). 

 

I increased stock allocations to 60% invested in stocks on 27 November. I bumped up stock investments to 65% on 19 December. Both increases were made at technical bottoms or shortly thereafter. For me, fully invested is a balanced 50% stock portfolio so this is higher. The failure of technical bottoms has been disappointing.

 

INTERMEDIATE / LONG-TERM INDICATOR

Wednesday, the VIX and Volume indicators were negative; Price and Sentiment were neutral. Overall this is a NEGATIVE / SELL indication. The concern is that the important sell-signal was last October. The NTSM long-term system can give sell signals near a bottom too. For the next day or two, I am ignoring this indication.

Housing Starts … Stock Market Analysis… ETF Trading … Dow 30 Ranking

HOUSING (Marketwatch)

“For the year to date, starts are 5.1% higher than in the same period last year. Housing starts ran at seasonally adjusted annual 1.256 million rate in November, the Commerce Department said Tuesday.” Story at…

https://www.marketwatch.com/story/housing-starts-increase-in-november-a-rare-bright-spot-for-housing-market-2018-12-18

 

MARKET REPORT / ANALYSIS         

-Tuesday the S&P 500 remained unchanged at 2545.

-VIX rose about 4% to 25.58.

-The yield on the 10-year Treasury slipped to 2.816% as of 5:06pm.

 

Today we tested the recent bottom of 2545 and the test was successful.  Every category of market internals that we use was positive at the test…once again, I am calling a bottom and correction over.  Any one who has read this blog recently knows I called the bottom at 2633 around Thanksgiving Holiday and that was retested 7 December. That one didn’t hold.  This time the numbers are broader and, in some ways, more optimistic. It looks like correction over to me…again. Will we be right this time? Only time will tell.

 

Some of the standard bottom indicators are now in place or close, too.  Bollinger Bands were oversold yesterday; RSI was 33 today (30 is oversold in my system); XLI-ETF (Industrial cyclicals) is still underperforming the S&P 500, but it is rapidly improving; the Overbought/Oversold Index is oversold as is my late-day oversold indicator (This one is oversold very infrequently.); unchanged volume was exceptionally high today and that sometimes happens at direction changes; and finally, the S&P 500 minus the XLU-ETF (Utilities) spread bottomed 2-days ago. Investors have been selling utilities over the last 3-days.

 

My daily sum of 17 Indicators declined from -6 to -7 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations dropped from -21 to -35.  These are not good numbers, but I think the bottom data we have today over-rules these numbers.

 

We saw a Sell signal on the long-term NTSM system again today.  The long-term signal can flash sell at a bottom so I’ll ignore it for now.  It first gave us the sell signal on 11 October and that was the important signal.

 

This is day 61 of this correction.  The Index is down 13.1% from its prior high. The average correction over the last 10-years (excluding major crashes) lasted 52-days. The average drop over that period was 12%. The longest correction in the last 10-years was the 19% drop in 2011. It took 108-days to complete, top to bottom.

 

Bottom line: I think the correction has made a bottom. At my current position (60% invested in stocks; 1/6 of that amount was added when the market had fallen 10%) I have a significant amount of cash on hand.  If I am right, we should see a big bounce tomorrow (like we saw at the last bottom call) because I’m using tried and true methods that the Wall Street boys know better than I do. That should give us the sign to join in and increase the % invested in stocks.  I expect to be buying tomorrow and I’ll bump the % of stock holdings to 70%. I might even buy Intel again.

 

What could go wrong this week? The Fed could screw it up with a bad message on the future, but I don’t expect it.

 

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%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Negative 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). 

 

I increased stock allocations to 60% invested in stocks on 27 November. For me, fully invested is a balanced 50% stock portfolio so this is slightly higher. I am considering reducing stock holding significantly, based on the recent market action.

 

INTERMEDIATE / LONG-TERM INDICATOR

Tuesday, the VIX and Volume indicators were negative; Price and Sentiment were neutral. Overall this is a NEGATIVE / SELL indication. The concern (as stated above) is that the important sell-signal was last October. The NTSM long-term system can give sell signals near a bottom too. For now, I am ignoring this indication.

Empire Manufacturing … Stock Market Analysis… ETF Trading … Dow 30 Ranking

EMPIRE MANUFACTURING (MarketWatch)

“The Empire State manufacturing index fell 12.4 points to 10.9 in December, the New York Fed said Monday. That’s the weakest level in 19 months.” Story at…

https://www.marketwatch.com/story/empire-state-factory-index-slumps-in-december-2018-12-17

My cmt: Any number greater than zero indicates expansion.

 

MARKET REPORT / ANALYSIS         

-Monday the S&P 500 dropped about 1.1% to 2545.

-VIX rose about 13% to 24.52.

-The yield on the 10-year Treasury slipped to 2.895% as of 4:58pm.

 

So, my bottom call of 2633 has proven to be too optimistic. The technical-bottom did not hold as it was overcome by news. No point in belaboring the point.

 

Today, the S&P 500 broke below the lower trendline going back to 2016 AND the closing low of 2582 for the Jan-Apr correction earlier in 2018. The test of that that level was unsuccessful. Closing volume was higher than previous lows which is not a good sign for ending a correction – we still could end tomorrow though. There were bottom indications today:

 

-13% stocks advanced today on the NYSE.  This is in the general range where we see a bottom.

 

-Longer term, the 10 and 20-day moving average (20-dMA) of stocks advancing on the NYSE are now below corrections going back to 2009 for which I have records handy. Today’s values were 35.1% and 42.4% for the 10-dMA and 20-dMA respectively. For reference, the numbers at the bottom of the 2010 correction (16%-drop) 37.7% and 48.4%. Markets are currently significantly oversold. Unfortunately, oversold conditions can persist longer than one would think.

 

-There were 884 stocks that made new-52-week lows today.  I had to go back to Jan 2016 to find numbers lower; on that day the S&P 500 was less than 2% above the final low of the correction that bottomed at 14% from its prior high.

 

-Comparing the number of stocks advancing vs the S&P 500 price, we see that the breadth is more bullish than the S&P 500 price and the spread has reached a point that is a decent bottom signal, however, this indicator is not exact and we may well see lower prices on the S&P 500 ahead.  

 

-The S&P 500 is 7.7% below its 200-dMA. It is rare to fall much below 7%. It has happened only 3-times in the last 7-years.

 

-Bollinger Bands are oversold; RSI hasn’t quite gotten to negative territory yet.

 

My daily sum of 17 Indicators improved from -8 to -6 (a positive number is bullish; negatives are bearish) while the 10-day smoothed version that negates the daily fluctuations dropped from -10 to -21.  Again, these are not good numbers.

 

We saw a Sell signal on the long-term NTSM system again today.  Unfortunately, this doesn’t make a decision any easier now, because the long-term signal can flash sell at a bottom.  It first gave us the sell signal on 11 October and that was the important signal. Too bad we got a Buy signal at the retest – I’d be feeling a lot better had I not gotten back in.

 

This is day 60 of this correction.  The Index is down 13.1% from its prior high. The average correction over the last 10-years (excluding major crashes) lasted 52-days. The average drop over that period was 12%. The longest correction in the last 10-years was the 19% drop in 2011. It took 108-days to complete, top to bottom.

 

It would seem that we are likely to see 2 closes below the 2600 level and that would signal a trendline break. In addition, I wrote yesterday that “…if the Index drops below the February lows (2582), I will be out.” On reflection, I am not sure that is the best course at this point. It appears we are close to a bottom, even though I don’t think we’re quite there yet.

 

If I decide to cut stock holdings, I’ll post before 1100, but at this point, it seems that we made a technical bottom already so a shift to the upside is possible soon.

 

Bottom line: I don’t think this is a bear market. I think it is a correction so I’ll plan to hang on longer. At my current position (60% invested in stocks with 1/6 of that amount added when the market had fallen 10%) I still have a significant amount of cash to buy stocks when we do see a bottom.  Can’t get too worried, I think we bottom soon unless the Fed screws it up this week with a bad message going forward.

 

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%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

MONDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained Negative 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). 

 

I increased stock allocations to 60% invested in stocks on 27 November. For me, fully invested is a balanced 50% stock portfolio so this is slightly higher. I am considering reducing stock holding significantly, based on the recent market action.

 

INTERMEDIATE / LONG-TERM INDICATOR

Monday, the VIX and Volume were negative; Price and Sentiment indicators were neutral. Overall this is a NEGATIVE / SELL indication. The concern (as stated above) is that the important sell-signal was last October. The NTSM long-term system can give sell signals near a bottom too. For now, I am ignoring this indication.