“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in
the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
“People always ask me what is going on in the markets. It
is simple. Greatest Speculative Bubble of All Time in All Things. By two orders
of magnitude.” – Michael “Big Short” Burry.
“I never imagined that I would see the day that the
Chairman of the House Judiciary Committee would step forward to call for raw [Supreme]
court packing. It is a sign of our current political environment where rage
overwhelms reason.” - Professor Jonathan Turley, honorary Doctorate of Law from
John Marshall Law School for his contributions to civil liberties and the
public interest.
FED BEIGE BOOK (Federal Reserve)
“The U.S. economy strengthened further from late May to
early July, displaying moderate to robust growth. Sectors reporting
above-average growth included transportation, travel and tourism,
manufacturing, and nonfinancial services. Energy markets improved slightly, and
agriculture had mixed results. Supply-side disruptions became more widespread,
including shortages of materials and labor, delivery delays, and low
inventories of many consumer goods. Strained car inventories resulted in
somewhat lower car sales despite steady demand, and home sales rose slightly
despite limited supply...Three-quarters of Districts reported either slight or
modest job gains and the remainder reported moderate or strong increases in
employment. Healthy labor demand was broad-based but was seen as strongest for
low-skilled positions. Wages increased at a moderate pace on average, and
low-wage workers enjoyed above-average pay increases... Prices increased at an
above-average pace, as seven Districts reported strong price growth and the
rest saw moderate gains.” Press release at...
https://www.federalreserve.gov/monetarypolicy/beigebook202107.htm
PPI / CORE PPI (Reuters)
“U.S. producer prices accelerated in June, leading to the
largest annual increase in more than 10-1/2 years, suggesting inflation could
remain high as robust demand fueled by the economy's recovery from the COVID-19
pandemic strains the supply chain...inflation is likely nearing its peak.
Excluding the volatile food, energy and trade services components, producer
prices rose 0.5%. The so-called core PPI gained 0.7% in May.” Story at...
https://www.reuters.com/business/us-producer-prices-surge-more-than-expected-june-2021-07-14/
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 7.9 million barrels from the
previous week. At 437.6 million barrels, U.S. crude oil inventories are about
8% below the five year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
Demand remains strong.
So, why did the XLE drop 4% today? It looks like energy is being
influenced by OPEC discussions regarding a production increase. There is no agreement at this time and who
knows whether they’ll ever agree.
LOW STRESS IN THE MARKETS (Heritage Capital)
“...the high yield bond ETF...is just a few pennies from all-time
highs. That is not the behavior you typically see at the end of bull markets or
even before a significant decline. If the junk bond market is sanguine and that
is where we see the first sign of trouble in liquidity, it does not stand to
reason that problems will pop up elsewhere first.” - Paul Schatz, resident Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/low-stress-in-markets-but-inflation-report-coming-up/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 10:30 PM Wednesday. US total case numbers are on the left axis; daily numbers
are on the right side of the graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.1% to 4374, near
the prior all-time high.
-VIX fell about 5% to 16.33.
-The yield on the 10-year Treasury rose to 1.337%. (The
Bond Ghouls are suggesting a decline in the economy/stock market.)
The market is narrowing. The 10-dMA of Breadth (% of issues
advancing on the NYSE over the last 10-days) was only 48.5. The % of issues
making new 52-week highs was 3.5%. That’s a low number. We’ll need to see what
this stat looks like if we can make a new high on the S&P 500. For now,
these stats are mildly bearish.
I see that the XLE (Energy ETF) has dropped out of the
top 3 in momentum for the ETFs I track. It is down almost 7% over the last
40-days, most of that decline has been recent. I plan to take profits in the
XLE. I can always buy it back if its momentum improves.
The daily sum of 20 Indicators declined from -6 to -10 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations slipped from -8 to -18. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term and many are trend following.
The Long Term NTSM indicator
remained HOLD. VIX, Volume, Price & Sentiment are neutral.
There is currently only 1
top-indicator warning of a top: (1) the index is stretched too far above its
200-dMA.
The Short-term indicator ensemble remains down and other short-term indicators are more bearish. It looks like a pullback may be in the works. The S&P 500 is about 3.4% above its 50-dMA so that would be a reasonable guess for a slow retreat. Other than taking profits in the XLE, I don’t plan on making significant portfolio changes unless the slide in indicators continues.
We still don’t have a strong warning from indicators.
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.
*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)
Here’s the revised DOW 30 and
its momentum analysis. 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…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained BEARISH 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.
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.
As of 25 May, my
stock-allocation is about 50% invested in stocks. I am not super bullish and I
am watching the markets closely. For now, 50% is a reasonable allocation for
me.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees. As a
retiree, 50% in the stock market is about fully invested for me – it is a
cautious and conservative number. If I feel very confident, I might go to 60%;
if a correction is deep enough, and I can call a bottom, 80% would not be out
of the question.
