“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.
Snow in Virginia Beach tomorrow? I’m going South!
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer Sentiment continued to decline due to falling
inflation-adjusted incomes, recently accelerated by rising fuel prices as a
result of the Russian invasion of Ukraine. The year-ahead expected inflation
rate rose to its highest level since 1981, and expected gas prices posted their
largest monthly upward surge in decades. Personal finances were expected to
worsen in the year ahead by the largest proportion since the surveys started in
the mid-1940s. Consumers held very negative prospects for the economy, with the
sole exception of the job market... The greatest source of uncertainty is
undoubtedly inflation and the potential impact of the Russian invasion of
Ukraine. In the March survey, 24% of all respondents spontaneously mentioned
the Ukraine invasion in response to questions about the economic outlook.”
Survey results at...
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 1.3% to 4204.
-VIX rose about 2% to 30.23.
-The yield on the 10-year Treasury rose to 1.998%.
Pullback Data:
Days since top: 47 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 12.3% at close. Max at close: 13%
(Avg.= 13% for non-crash pullbacks)
The S&P 500 is 5.9% below its 200-dMA & 6.1%
below its 50-dMA. (i.e., the Index is 0.2% from a Death Cross when the 50-dMA
crosses below the 200-dMA.)
The slope of the 200-dMA is up, but only by a slim-slim, whisker.
(The S&P 500 isn’t there yet, but a falling 200-dMA is very bearish.)
TODAY’S COMMENT:
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 up. Bollinger Bands and RSI are reasonably close to oversold; the number
of up-days on 10 and 20-day time frames are both suggesting a bounce soon.
Perhaps there will be a bounce next week, but probably not before a huge
down-day.
On Friday’s I summarize a number of indicators to get a
weekly feel for trend.
The Friday run-down of some important indicators reversed
a slowly improving, trend we had seen for a few weeks and has moved sharply
to the bear side (19-bear and 3-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
- Issues advancing on the NYSE (Breadth) are diverging with
the S&P 500 Index in the bullish direction.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
NEUTRAL
-There have been 4 Distribution Days in the last week
since a Follow-thru day cancelled prior Distribution Days.
-The S&P 500 is 5.9% below its 200-dMA (Bear
indicator is 12% above the 200-day.). 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 subsequently turned positive.
-The Fosback High-Low Logic Index is neutral, but has
moved closer to bear territory.
-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. I’ve seen a comment from a Pro
that the correction won’t end until the S&P 500 has a 90% down-volume day.
-There have been 6 up-days over the last 20 sessions
–bullish, but this indicator works with VIX and VIX is too high. This is an
indication of a short-term oversold condition.
-There have been 2 up-days over the last 10 sessions–
leaning bullish, but neutral.
-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%. – It proved correct, but is
now Expired
-15 February, the 52-week, New-high/new-low ratio
improved by 4.2 standard deviations – Bullish, but the signal has expired.
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 3 have been up-down-up.
-The smoothed advancing volume on the NYSE is falling rising.
-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 62 consecutive days. (3 days in a row is my bear signal)
-Smoothed Buying Pressure minus Selling Pressure is headed
down
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bearish crossover 8 March. This one has switched back and
forth.
-MACD of S&P 500 price made a bearish crossover, 2
March.
-My Money Trend indicator has turned down.
-Long-term new-high/new-low data is falling.
-The Smart Money (late-day action) is falling. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-Short-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.
-McClellan Oscillator.
-VIX is rising sharply.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-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 19 bear-signs and 3 bull-signs. Last week, there were 11 bear-signs and 9 bull-signs.
The daily sum of 20 Indicators dropped from +8 to -3 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations declined from +61 to +54 (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. Long-term
indicators improved too.
The Long Term NTSM indicator
ensemble remained SELL. VOLUME & VIX are bearish; SENTIMENT is
neutral. PRICE is bullish. The
Sell-signal isn’t meaningful now. It is
telling us market conditions are poor, as if we didn’t already know. The important sell-signal was 8 days after
the start of this correction.
Until we see more bullish signs, I remain bearish.
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
TRADING POSITIONS:
- I ‘m still holding the XLE-ETF (Energy).
- I sold my SDS position late in the day because I didn't want to hold it over the weekend in case there was progress in Ukraine.
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.
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.
My stock-allocation in the
portfolio is now about 35% invested in stocks. This is below 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. 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.
