“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
NONFARM PAYROLLS / UNEMPLOYMENT RATE / AVG HOURLY
EARNINGS (CBNC)
“The U.S. economy added far fewer jobs than expected in
December just as the nation was grappling with a massive surge in Covid cases,
the Labor Department said Friday. Nonfarm payrolls grew by 199,000, while the
unemployment rate fell to 3.9%...Average hourly earnings rose more than
expected as the U.S. sees its fastest inflation pace in nearly 40 years. Wages
climbed 0.6% for the month and were up 4.7% year over year.” Story at...
https://www.cnbc.com/2022/01/07/hiring-falters-in-december-as-payrolls-rise-only-199000.html
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:00 PM ET 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.
I am still sick with Omicron left-overs. Less coughing today, but still too much. Today is day 12.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.4% to 4677
-VIX slipped about 4% to 18.76. (Not sure why. Do the
Options players think the pullback is over?)
-The yield on the 10-year Treasury rose to 1.767%.
The S&P 500 closed just above its 50-dMA, or 0.1%
above it to be exact. If it breaks convincingly lower, we’ll need to worry
about a more significant correction. The last time it dipped lower and recovered
with no harm done. I doubt that we’ll be
as lucky this time. Of course, I think I said that the last time too. I think
this bear sign is important:
2.8% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 3 January. This indicates
that the advance is too narrow and a correction from here (if we do break the
50-dMA) is likely to be >10%.
The Friday run-down of some important indicators turned sharply
to the Bear side (13-bear and 6-bull). 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 100-dMA % of issues advancing on the NYSE
(Breadth) is above 50%
-The size of up-moves has been larger than the size of
down-moves over the last month.
-McClellan Oscillator.
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA
are both ABOVE the 20-dEMA.
NEUTRAL
-The S&P 500 has had 4 Distribution Days in the last
25-days; Neutral. Others were cancelled by a Follow-thru day 15 December.
-There have been 3 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This can be a bull or bear. Now
it’s neutral.
-The S&P 500 is 6.2% 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. (Bigger bottoms are formed when the Index is
at, or below, the 200-dMA.)
-Non-crash Sentiment indicator is bullish (97%-bulls on a
5-day basis), just short of sending a bear signal. (Too bullish is bearish.)
-Bollinger Bands are neutral.
-The S&P 500 Index is OK when compared to the issues
advancing on the NYSE (Breadth).
-Overbought/Oversold Index (Advance/Decline Ratio).
-Today, 7 January, the 52-week, New-high/new-low ratio
improved by 1.5 standard deviations somewhat bullish, but not enough to send a
signal.
-Back-to-back >80% up-volume days cancelled two prior
high, down-volume days and gave a bullish buy signal on 7 December. This signal
has expired.
-The Fosback High-Low Logic Index is neutral, but moving
toward bear territory.
-RSI is neutral.
-There have been 8 up-days over the last 20 sessions –
Neutral.
-There have been 3 up-days over the last 10-
-The Calm-before-the-Storm Indicator.
-VIX.
-There were Hindenburg Omen signals 13 & 16 December. These have been cancelled because the
McClellan Oscillator turned positive.
-49% of the 15-ETFs that I track have been up over the
last 10-days – It’s headed down sharply so it could be called bearish. Let’s call it neutral for consistency.
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50% today.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
has been below 50% for 18 consecutive days.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bearish crossover 5 January.
-Buying Pressure minus selling pressure is trending down.
-MACD of S&P 500 price made a bearish crossover, 6
January. Strong bearish signal now.
-My Money Trend indicator is falling.
-Short-term new-high/new-low data is rising.
-Long-term new-high/new-low data is falling.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-The Smart Money (late-day action) is falling. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-2.8% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 3 January. (There is no
bullish signal for this indicator.) This indicates that the advance is too
narrow and a correction from here is likely to be >10%.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions.
On Friday, 21 February, 2 days after the top before the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 13 bear-signs and 6 bull-signs. Last week, there were 7 bear-signs and 12
bull-signs.
This looks pretty bearish to me. All this market weakness
seems to be a hold-over from the Fed minutes that indicated quicker tapering
and balance sheet run-off.
The daily sum of 20 Indicators remained -8 today (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from +17 to +10 (The trend
direction 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. Price is Bullish; Volume, VIX & Sentiment are
Neutral.
From here all we can do is
watch the 50-dMA. Given the current
bearish signs, a break lower suggests a real correction is likely (but not
guaranteed).
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 40% invested in stocks; I hadn’t calculated this number
since I made some year-end stock sales. This is close to my “normal” fully
invested stock-allocation of 50%. I trade about 15-20% of the total portfolio
using the momentum-based analysis I provide here.
It’s all about the 50-dMA now.
If it fails I’ll be in defense mode.
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.
