“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“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.
EMPIRE STATE MANUFACTURING (Reuters)
“The New York Federal Reserve said on Monday its
barometer of manufacturing business activity in New York State declined more
than expected in August after growing at a record-setting pace in the month
before. The regional Fed’s “Empire State” index on current business conditions
fell around 25 points to 18.3...” Story at...
RETAIL SALES (CNBC)
“Shoppers in the U.S. cut back their purchases in July
even more than expected as worries over the delta variant of Covid-19 dampened
activity and government stimulus dried up. Retail sales for the month fell
1.1%...” Story at...
https://www.cnbc.com/2021/08/17/retail-sales-july-2021.html
INDUSTRIAL PRODUCTION (Federal Reserve)
“Industrial production increased 0.9 percent in July
after moving up 0.2 percent in June. In July, manufacturing output rose
1.4 percent. About half of the gain in factory output is attributable to a
jump of 11.2 percent for motor vehicles and parts, as a number of vehicle
manufacturers trimmed or canceled their typical July shutdowns. Despite the
large increase last month, vehicle assemblies continued to be constrained by a
persistent shortage of semiconductors...” Press release at...
https://www.federalreserve.gov/releases/g17/current/default.htm
FED EYES TAPERING IN A FEW MONTHS (WSJ)
“Federal Reserve officials are nearing agreement to begin
scaling back their easy money policies in about three months if the economic
recovery continues... this timetable...would enable them to raise
interest rates sooner than currently anticipated if the economy makes rapid
progress toward their goals.” Story at...
https://www.wsj.com/articles/fed-officials-weigh-ending-asset-purchases-by-mid-2022-11629106200
My cmt: In 2013 there was a significant impact to bond
markets when the Fed chair hinted at tapering bond purchases. The so-called “Taper Tantrum” didn’t upset
the S&P 500 too much; the Tantrum started in December 2013 and the max
drawdown in 2014 was about 7%.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30 PM Tuesday. U.S. total case numbers are on the left axis; daily
numbers are on the right side of the graph in Red with the 10-dMA of daily
numbers in Green.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 fell about 0.9% to 4448.
-VIX rose about 11% to 17.91.
-The yield on the 10-year Treasury dropped to 1.264%.
The Hindenburg Omen is a stock market indicator named
after the famous crash of the Hindenburg dirigible in New Jersey in 1937. As
you might expect, it is supposed to forewarn of a stock market crash. To have a Hindenburg Omen warning the
following conditions must be met:
“-The daily number of new 52-week highs and 52-week lows
in a stock market
index are greater than a threshold amount (typically 2.2%).
-The 52-week highs cannot be more than two times the
52-week lows.
-The stock market index is still in an uptrend. A
10-week moving
average, or the 50-day rate of
change indicator, is used to indicate this.
-The McClellan
Oscillator (MCO), a measure of the shift in market sentiment,
is negative.”
Definition from Investopedia at...
https://www.investopedia.com/terms/h/hindenburgomen.asp
I use this definition for the Hindenburg Omen. I wrote
Monday that there were no Hindenburg Omens in effect. Based on the latest data,
I was wrong; we had Hindenburg Omens on Monday and Today! Previously, we saw
Hindenburg warnings on 11 May and 2 & 4 March of this year. No crash
ensued, so this Omen may be overstated. However, there are other bearish signs
popping up.
The 50-dMA of issues advancing on the NYSE has dropped
below 50% and MACD of breadth turned bearish today. Together, this is very
concerning. If the 50-dMA persists below
50% for a few more days, it sends a very bearish warning.
The daily sum of 20 Indicators declined from -2 to -8 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations slipped from -32 to -37. (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.
These stats suggest that we
may see some trouble in the markets. It’s not a done deal though, today was a
statistically significant down-day. That just means that the price-volume move
exceeded my statistical parameters. Data shows that a
statistically-significant, down-day is followed by an up-day about 60% of the
time.
The Long Term NTSM indicator declined
to HOLD. Price, VIX, Volume & Sentiment are neutral.
It looks like we’re headed for a rough patch
in the stock market.
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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals declined to 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.
My stock-allocation is about 50%
invested in stocks. I am not super bullish (or bearish) and I am watching the
markets closely.
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.
