“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"If I was Darth Vader and I wanted to destroy the US
economy, I would do aggressive spending in the middle of an already hot
economy...This is the biggest bubble I've seen in my career." - Stanley
Druckenmiller, billionaire investor.
PERSONAL SPENDING / PCE PRICES (Reuters)
“U.S. consumer spending increased solidly in September,
but was partly flattered by higher prices, with inflation remaining hot as
shortages of motor vehicles and other goods persisted amid global supply
constraints... Consumer spending, which accounts for more than two-thirds of
U.S. economic activity, rose 0.6% last month... Price pressures remained strong
in September, reducing consumers’ buying power. The personal consumption
expenditures (PCE) price index, excluding the volatile food and energy
components, climbed 0.2%.” Story at...
CHICAGO PMI (MarketWatch)
“The Chicago Business Barometer, also known as the Chicago PMI, rose to 68.4 in October
from 64.7 in the prior month. It’s the strongest reading since July.” Story
at...
UNIV OF MICHIGAN SENTIMENT (University of Michigan)
“Consumer sentiment has remained virtually unchanged in
the past three months, at levels comparable to the pandemic low point in April
2020, according to the University of Michigan Surveys of Consumers. The positive
impact of higher income expectations and the receding coronavirus has been
offset by higher rates of inflation and falling confidence in government
economic policies, said U-M economist Richard
Curtin, director of the surveys...The Consumer Sentiment Index
posted a small decline in October, retreating to 71.7 from last month’s 72.8,
and falling to just below the pandemic low of 71.8.” Story at...
https://news.umich.edu/inflation-uncertainty-highest-in-four-decades/
CLIMATE ACTIVISTS BLOW SMOKE ON WILDFIRE FEARS (WSJ)
“In the early 1900s, about 4.2% of land world-wide burned
every year...A century later, that had dropped almost to 3%. That decline has
continued through the satellite era, and 2021 is likely to end with only 2.5%
of the globe having caught fire, based on data through Aug. 31...Human
ingenuity gets the credit...societies can increasingly afford to defend our
surroundings with fire suppression and forest management. Climate studies that
predict significantly more fires typically ignore this history.” - Bjorn
Lomborg, president of the Copenhagen Consensus and a visiting fellow at the
Hoover Institution. His latest book is “False Alarm: How Climate Change Panic
Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.” Commentary
at... https://www.wsj.com/articles/climate-activists-blow-smoke-on-wildfire-fears-adaptation-land-11635367688
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 7:00 PM Friday. 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. I added the smoothed 10-dMA of new cases (in purple) to the chart.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.2% to 4605.
-VIX fell about 2% to 16.26.
-The yield on the 10-year Treasury slipped to 1.560%.
Revenues for Apple and Amazon disappointed so I suspected
the markets might have trouble today. Nope.
They shrugged it off and made another new high. Let’s check Friday’s
data.
The Friday run-down of some important indicators remains on
the bull side (3-bear and 15-bull), but somewhat less than last week. These
indicators tend to be both long-term and short-term, so they are different than
the 20 that I report on daily. Details follow:
BULL SIGNS
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is above 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 23 September.
-MACD of S&P 500 price made a bullish crossover, 13
October.
-McClellan Oscillator.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA
are both above the 20-dEMA.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-The Smart Money (late-day action) indicates the Pros are
leaning bullish. (This indicator is based on the Smart Money Indicator
developed by Don Hayes).
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500, but the curve is sharply rising so this goes in the bull category.
-The S&P 500 is out-performing the Utilities ETF
(XLU).
-58% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Non-crash Sentiment indicator is leaning bearish, but
not enough to send a bullish signal.
-There was a Hindenburg Omen signal 28 September. The McClellan Oscillator turned positive
afterward, so the Omen has been cancelled.
-There have been 2 Statistically-Significant days in the
last 15-days – too low to send a signal. This can be a bull or bear.
-Bollinger Bands
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-Calm-before-the-Storm Indicator – expired.
-The S&P 500 is 9.4% above its 200-dMA (Bear
indicator is 12%.). This value was 15.9% above the 200-dMA when the 10%
correction occurred in Sep 2020.
-The Fosback High-Low Logic Index is neutral.
-There have been 13 up-days over the last 20 days.
Neutral
-There have been 8 up-days over the last 10-days - leaning
bearish, but still Neutral
-Statistically, the S&P 500 gave a panic-signal 17
Sept. Signal has expired.
-4.7% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high 29 October. (There is no
bullish signal for this indicator.) This is below the average for all-time
highs, but it still suggests that if we do have a pullback, it is likely to be
less than 10%.
-28 October, the 52-week, New-high/new-low ratio improved
by 0.33 standard deviations, somewhat bullish, but Neutral.
-Distribution Days.
There have been 1 in the last 25-days - Neutral.
-VIX is falling, but not enough to send a signal.
-Overbought/Oversold Index (Advance/Decline Ratio) is Neutral.
BEAR SIGNS
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-Short-term new-high/new-low data is trending lower.
-Long-term new-high/new-lows are falling.
-My Money Trend indicator is falling sharply.
-RSI’s value of 91 is very overbought.
-The smoothed advancing volume on the NYSE is falling.
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 6 bear-signs and 12 bull-signs. Last week, there were 3 bear-signs and 15
bull-signs.
There are 2 topping warnings now in effect: RSI and
Breadth vs, the S&P 500. The Index is getting ahead of the underlying % of issues
advancing on the NYSE.
The daily sum of 20 Indicators improved from -7 to -5 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from +28 to +14. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator ensemble
remained BUY. Volume and Price are bullish; Sentiment and VIX indicators are
neutral. This is an indication that the market conditions are good. Sometimes they can be too good.
I remain bullish.
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
FRIDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained HOLD.
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.
My stock-allocation in the
portfolio is now about 65% invested in stocks; this is above my “normal” fully
invested stock-allocation of 50% stocks. Indicators are very bullish, so I am
holding a short-term position in additional Index Funds to boost returns.
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 general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
