“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“I understand that publicly admitting that oil and gas
will play an essential and significant role during the transition and beyond
will be hard for some...But admitting this reality will be far easier than
dealing with energy insecurity, rampant inflation, and social unrest as the
prices become intolerably high and seeing net-zero commitments by countries
start to unravel.” - Amin Nasser, CEO, Aramco, as quoted by the Financial Times.
NFIB SMALL BUSINES OPTIMISM (NFIB)
“The NFIB Small Business Optimism Index increased
slightly in November by 0.2 points to 98.4... “As the end of the year nears,
the outlook for business conditions is not encouraging to small business owners
as lawmakers propose additional mandates and tax increases,” said NFIB Chief Economist Bill Dunkelberg.
“Owners are also pessimistic as many continue managing challenges like rampant
inflation and supply chain disruptions that are impacting their businesses
right now.” Report at...
https://www.nfib.com/content/press-release/economy/small-business-optimism-up-slightly-in-november/
PPI (CNBC)
“Wholesale prices increased at their quickest pace on
record in November in the latest sign that the inflation pressures bedeviling
the economy are still present, the Labor Department reported Tuesday. The producer
price index for final demand increased 9.6% over the previous
12 months...” Story at...
THIRD BUBBLE IN 100 YEARS
“...enjoy any Santa rally while it lasts, as the team
[led by Barry Bannister] sees a near-term correction taking the S&P 500
toward the low 4,000s by the first quarter of next year. And then…“Later in
2022-23E, we believe the ‘behind-the-curve’ Fed might create the third bubble
in 100 years, by 2023 to 6,750 for the S&P 500 (Nasdaq [approximately] 25,000),”
said the Stifel team.” Story at...
My cmt: So these guys think the markets will run for 2
more years and THEN we’ll have a bubble? I’d like to believe it, but I think
the final top will be sooner. The bubble is here – the Fed will pop it,
probably in 2022.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 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. I added the smoothed 10-dMA of new cases (in purple) to the chart.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 fell about 0.7% to 4635.
-VIX rose about 6% to 21.57.
-The yield on the 10-year Treasury rose to 1.446%.
A large divergence between the small cap Russell 2000
(RUT) and the S&P 500 (GSPC) is typical at tops as shown in the Dot.com
Bubble chart below. Unfortunately, we are seeing large divergences now between
RUT and GSPC in today’s chart, the Everything Bubble.
The above chart is an obvious warning.
The Fed meeting remains the focus this week. Technically, we note that the S&P 500 is
nearing its 50-day moving avg and that will be an important test for the Index
and market as a whole.
My Money Trend indicator is diverging higher from the
S&P 500 today. The same is true for
the XLI (cyclical industrial stocks). Both suggest that the markets may move
higher, perhaps after the Fed meeting. The 5-10-20 Timer system is still a buy.
While some bull-signs are appearing, there are more bear signs too. One
negative divergence is Utilities. The
XLU is outperforming the S&P 500.
Other Bear signs are picking up: The 10-dMA, 50-dMA &
100-dMA of breadth are all below 50%, indicating that less than half of issues
on the NYSE have been up over the last 10, 50 & 100 days. MACD of price
turned bearish; MACD of Breadth was already bearish (from last Friday). The S&P
500 is still too far ahead of overall issues on the NYSE. (That’s another way
of saying that small caps are underperforming the Index by too much.)
Today, the daily sum of 20 Indicators improved from -5 to
-3 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from -78 to -64 (The trend is
more important than the actual number for the 10-day value.) 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 HOLD. VIX remained bearish: Volume, Price & Sentiment are Neutral.
At best, I am neutral
regarding the stock market. We’ll find
out what’s up after the Fed meeting ends on Wednesday.
I really don’t like the fact
that only 1.7% of all issues traded on the NYSE made new, 52-week highs when
the S&P 500 made a new all-time-high, on 10 December. That suggests a
correction from here would be >10%. Given the market action this week, I
plan to reduce my stock portfolio to a more conservative (but still fully
invested) 50% invested in stocks. If the market moves strongly higher tomorrow,
I might wait until after the Fed meeting to decide. Otherwise, I think it best to reduce exposure
sooner.
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 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%. Given current weakness, I plan to take losses and cut
that position to 50% invested in stocks.
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.
