“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Faced with a combination of record speculative extremes
and deteriorating speculative conditions, investors may want to remember that
the best time to panic is before everyone else does.” – John Hussman, Phd.
PERSONAL SPENDING / PERSONAL INCOME (MarketWatch)
“U.S. consumer spending rose briskly in January and
prices climbed faster, as households shrugged off rising infections due to the
Omicron variant of Covid-19... Personal income was unchanged on the month...”
https://www.marketwatch.com/story/u-s-personal-spending-rose-2-1-in-january-update-271645796739
PCE PRICES (CNBC)
“Inflation as gauged by the Fed’s preferred core PCE
measure rose 5.2% in January from a year ago. That was the biggest rise since
April 1983.” Story at...
https://www.cnbc.com/2022/02/25/pce-inflation-january-2022-.html
DURABLE ORDERS (Yahoo Finance)
“U.S. durable goods orders rose well beyond what analysts
expected month-over-month in January, marking the fourth straight month of
increases for orders of big-ticket items as supply chain troubles ease. The U.S. Census Bureau's
latest data released Friday showed new orders for manufactured durable goods jumped $4.3 billion, or 1.6%...”
Story at...
https://finance.yahoo.com/news/durable-goods-orders-jump-much-160400795.html
CALLING THE CURRENT STATE OF THE MARKET A CORRECTION IS A
JOKE (Yahoo Finance)
“The traditional media is taking note today that the
S&P 500 is now in 'correction' territory which is defined as a drop of 10%
from highs but less than 20%. At 20%, the correction becomes a bear market. It
is not clear where these definitions come from, but it is likely that
journalists that needed a convenient shorthand for characterizing the market in
a headline were involved...From my perspective, this is a roaring grizzly bear
of a market, but for the folks on television, this is just some routine
correction. The good news is that I'm looking for the end of this bear market
while the folks on TV are still trying to figure out if one has even started.”
– James Deporre, of sharkinvesting.com, an interactive online community that
serves and educates active investors.
INVESTORS SHOULD SELL INTO RALLYS – 75% OF NASDAQ IN BEAR
TERRITORY (msn.com)
“Instead of buying the dips, investors should be selling
the rips in the stock market as the Federal Reserve begins to raise interest
rates into a bear market, Bank of
America said in a Friday note.” Story at...
TRUMP’S ATTORNEYS ARE STILL LOSING (msn.com)
“Skewering attorney Sidney Powell and her peers
for their “inexplicable” delay, a federal appeals court on Thursday shot down
the so-called Kraken lawyers’ request to pause sanctions that could lead to
disciplinary proceedings or disbarment. A three-member panel of the Sixth
Circuit Court of Appeals rejected the stay proposed by attorneys Powell, Gregory J. Rohl, Brandon Johnson, Howard Kleinhendler, Julia Haller,
and Scott
Hagerstrom, all of whom are fighting for their law licenses
after a district court judge referred them to their respective bars...“It is
one thing to take on the charge of vindicating rights associated with an
allegedly fraudulent election,” Parker wrote in a 110-page order on Aug. 25,
2021. “It is another to take on the charge of deceiving a federal court and the
American people into believing that rights were infringed, without regard to
whether any laws or rights were in fact violated. This is what happened here.”
Story at...
In other words, lawyers are officers of the court and
must uphold fairness and integrity of the judicial system; they can’t lie in
court, but that’s what these lawyers did.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 2.2% to 4385.
-VIX dipped about 9% to 27.59.
-The yield on the 10-year Treasury slipped to 1.969%.
Pullback Data:
Days since top: 37 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 8.6% at close. Max at close: 11.9% (Avg.=
13% for non-crash pullbacks)
The S&P 500 is 1.7% BELOW its 200-dMA & 3.8%
BELOW its 50-dMA.
Max Retracement from bottom: 56% 2 Feb.
The slope of the 200-dMA is up, but just barely.
The Friday run-down of some important indicators got more
bullish compared to last week to (13-bear and 8-bull), but remained leaning to
the bear side. 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
-24 Feb was a Follow-Thru Day. This cancels prior Distribution
Days.
-15 February, the 52-week, New-high/new-low ratio
improved by 4.2 standard deviations – Very Bullish.
-McClellan Oscillator.
-The S&P 500 Index is lagging when compared to the issues
advancing on the NYSE (Breadth).
-The smoothed advancing volume on the NYSE is rising.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 25 February. This one has switched back and
forth.
-The Smart Money (late-day action) is bullish. (This indicator
is based on the Smart Money Indicator developed by Don Hayes).
-Short-term new-high/new-low data is rising.
NEUTRAL
-The S&P 500 is -1.7% 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.)
-Bollinger Bands.
-RSI
-Overbought/Oversold Index (Advance/Decline Ratio)
-There was a Hindenburg Omen signal on 10 January. It has been cancelled because the McClellan
Oscillator turned positive.
-The Fosback High-Low Logic Index is neutral, but has
moved toward bear territory.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-Non-crash Sentiment indicator is too high (91%-bulls on
a 5-day basis), but not enough to give a sell signal. (Too bullish is bearish.)
-No 90% up or down days.
-There have been 11 up-days over the last 20 sessions.
-There have been 4 up-days over the last 10 sessions.
-The Calm-before-the-Storm/Panic Indicator.
-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 indicated that the advance was too
narrow and a correction was likely to be >10%. – Expired
-Cyclical Industrials (XLI-ETF) are even with the S&P
500 in the short-term.
-My Money Trend indicator is flat
BEAR SIGNS
-There have been 5 Statistically-Significant days (big
moves in price-volume) in the last 15-days. I’ll call this bearish since the
last 2 have been up. If we get another one up, I might switch to bullish since
it could be suggesting strength off the recent bottom.
-VIX is rising sharply.
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is below 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50%.
-The 100-dMA % of issues advancing on the NYSE
(Breadth) is below 50%
-The 50-dMA % of issues advancing on the NYSE (Breadth)
has been below 50% for 52 consecutive days. (3 days in a row is my bear signal)
-Smoothed Buying Pressure minus Selling Pressure is falling.
-MACD of S&P 500 price made a bearish crossover, 17
February.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-Long-term new-high/new-low data is falling.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions.
-Only 37% of the 15-ETFs that I track have been up over
the last 10-days.
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 8 bull-signs. Last week, there were 17 bear-signs and
3 bull-signs.
Today, there was a broad-based rally on Wall Street. It
is hard to say if the correction is over or if this is just a bounce. Utilities
outpaced the S&P 500 and that is usually a bearish sign, so that supports
the bounce argument.
The S&P 500 has re-traced bout 40% of the recent
drop. If this is just a bounce, we can expect some more gains. I usually assume
a bounce may make about a 50% retracement, so that would take the S&P 500
to roughly 4410. If it gets above 60%, then I may have to re-think the bounce
assumption.
Today, there was high unchanged volume. Many believe that
this indicator suggests investor confusion at market turning points. Recent
history shows this indicator has indicated a reversal of some kind, either now,
or near future. My problem is that it is frequently a false signal. At this
point if the indicator is sending a decent signal, the direction of reversal
would be down. I’m not convinced, but there weren’t clear signs that the market
weakness is over either.
The daily sum of 20 Indicators improved from -4 to +4 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations dropped from -47 to -48 (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 to SELL. Volume & VIX are bearish; Price & Sentiment
are Neutral; New-High/New-Low data is bullish.
I hope to be able to call a bottom, but sometimes the tea
leaves are not strong and I have to play catch-up. So far this still looks like
a bounce not a correction end - we’ll see.
Until we see some more bullish signs, I remain bearish.
TRADING POSITIONS:
XLE; Purchased Wednesday, 26 January. I sold XLE today.
It has not performed well since it peaked 2 weeks ago. It under performed the
markets today and I didn’t want to lose on the trade.
BEST ETFs - 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.
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
BEST DOW STOCKS - TODAY’S MOMENTUM
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 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.
I trade about 15-20% of the
total portfolio using the momentum-based analysis I provide here. If I can see
a definitive bottom, I’ll add a lot more stocks to the portfolio using an
S&P 500 ETF.
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.
