“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
ISM MANUFACTURING (ISM)
“The January Manufacturing PMI® registered 57.6
percent, a decrease of 1.2 percentage points from the seasonally adjusted
December reading of 58.8 percent. This figure indicates expansion in the
overall economy for the 20th month in a row after a contraction in April and
May 2020... “The U.S. manufacturing sector remains in a demand-driven, supply
chain-constrained environment, but January was the third straight month with
indications of improvements in labor resources and supplier delivery
performance. Still, there were shortages of critical intermediate materials,
difficulties in transporting products and lack of direct labor on factory
floors due to the COVID-19 omicron variant...Panel sentiment remains strongly
optimistic, with seven positive growth comments for every cautious comment, up
from December’s ratio of 6-to-1.” Report at...
CONSTRUCTION SPENDING (WHTC-AM)
“U.S. construction spending increased less than expected
in December as a solid rise in private projects was partially offset by a sharp
decline in outlays on public projects. The Commerce Department said on Tuesday
that construction spending rose 0.2% after advancing 0.6% in November.” Story
at...
https://whtc.com/2022/02/01/u-s-construction-spending-misses-expectations-in-december/
JOLTS – JOB OPENINGS (USA Today)
“Job openings neared their all-time high in December
despite the spread of COVID’s omicron variant while quitting dropped modestly
from its record level as workers continued to hold the cards amid labor
shortages. Employers advertised 10.9 million job openings, up from 10.8 million
the previous month and just below July’s all-time high of 11.1 million... The
number of employees quitting jobs dipped to 4.3 million from a record
4.5 million in November.” Story at...
My cmt: There were 6.3 million people unemployed as of
December 2021.
WHAT HAPPENS WHEN THE FED HIKES? (Ciovacco Capital)
https://www.youtube.com/watch?v=DcDqQdp5T7s
My cmt: As seen above, frequently, not much.
MARKET BOTTOM? IS IT IN? (RIA)
...the age-old Wall Street axiom “so goes January, so goes the
year.” [The following chart is YTD and that means this is a January-January
Comparison. The closest comparison in 1938? Ouch!]
...However, while the technicals suggest a short-term
bottom is getting established, we are concerned that may limit any bounce to a
50% to 61.8% Fibonacci retracement of the recent decline. From Friday’s close,
such would entail a further rally of roughly 3-4% before the market runs into
the broken 50-day moving average. At that juncture, most of the oversold
indicators will be back to overbought, and we could potentially see a reversal
to retest the recent lows.” Commentary at...
https://realinvestmentadvice.com/market-bottom-is-it-in-or-more-downside-coming/
CORONAVIRUS (NTSM)
Johns Hopkins is having some problems tonight. I’ll update Covid data tomorrow.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose
about 0.7% to 4546.
-VIX dipped about 9% to 27.66. (That’s a 28% drop in 2
days! Bullish.)
-The yield on the 10-year Treasury rose to 1.794%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 20 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: Now 5.2%; Max intraday: 12% (Avg.= 13% for
non-crash pullbacks)
The S&P 500 is 2.4% above its 200-dMA.
Retracement from bottom: 47%.
The slope of the 200-dMA is still up.
Tuesday, we got more confirmation that the pullback is
over. Market Internals were strong;
Utilities under-performed; Cyclical Industrials out-performed. This doesn’t guarantee
that we won’t go back and retest the lows. A retest was the norm during
corrections before QE. Recently, the
markets have not retested, so we don’t know what will happen in that
regard. That’s why I am heavily invested
now rather than waiting for a possible retest.
Here’s another bullish sign: Alphabet reported solid
earnings. It was up 1.6% during the day
and jumped more than 6% in after-hours trading.
One of the traders on a discussion board I used to visit,
frequently reminded traders that every major crash has been preceded by a 10%
correction. If that is the case, then chart
wise, we may have formed the left shoulder of a head-and-shoulders pattern. We won’t know if that scenario is going to
playout until months from now, but it is a concern and we must be aware of it. We
could see a major top this year...or not.
I’ll look for weakness in the markets and sell-signals in the indicators
rather than worrying about a crash that may not happen this year. It is coming
though.
The daily sum of 20 Indicators improved from +6 to +9
today (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations improved from -51 to -34 (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 improved to BUY. Price & VIX are bullish; Volume & Sentiment
are Neutral. The LT NTMS indicator is usually slow to issue a buy-signal. Today
is only the 3rd day after the low, so buy-signal is nice to see and
is bullish to say the least.
I am bullish, but markets won’t go straight up and we
could always see a retest of the low.
POSITIONS ADDED:
Last week: AAPL; XLE;
Monday: QLD; SPY
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.
Today, I increased my
stock-allocation in the portfolio to about 65% invested in stocks. This is above
my “normal” fully invested stock-allocation of 50%. I will hold this
trading-position for a while, but it will not be a long-term hold.
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.
