“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.
PAYROLL REPORT / UNEMPLOYMENT RATE (Go Banking Rates)
"Despite a tight labor market, total nonfarm
payroll employment rose by a surprisingly strong 678,000 in
February, the Bureau of Labor Statistics reported on Friday, March 4. This was
well above the 440,000 jobs economists forecasted, Barron’s reported...
the unemployment rate edged down to 3.8%...” Story at...
AVG HOURLY EARNINGS / AVG WORKWEEK (Time)
“Friday’s report showed average hourly earnings were
little changed in February and up 5.1% from a year ago, a deceleration from the
prior month. The average workweek ticked up to 34.7 hours.” Story at...
https://time.com/6154865/jobs-report-february/
BOTTOM? BUT SOMETHING DOESN’T FEEL RIGHT (Heritage
Capital)
“Two days ago, investors, or at least my Twitter feed,
were starting to get a little more bullish. Thursday’s action was not
constructive although it certainly seems like we go up then down then up then
down. Yesterday felt like the peak after the first bounce from the January 24th
low. And Friday is not looking so hot to begin the day. I was encouraged that
our models showed improvement after the latest low, but one of our aggressive
ones not only reduced exposure on the rally but flipped to a leveraged short
position, making this period a lot more complicated and murky. It will be
interesting to see where it ends up at the close today [Friday 4 March].”
Commentary at...
https://investfortomorrow.com/blog/evidence-mounts-for-a-bottom-but-something-doesnt-feel-right/
BANK OF AMERICA – FED HIKES IN A PRICEY MARKET END POORLY
(Yahoo Finance / Bloomberg)
“Optimists expecting the stock market to weather the
rate-hike cycle as they’ve done in the past are missing one important detail,
according to Bank of America Corp.’s strategists. While U.S. equities saw
positive returns during previous periods of rate increases, the key risk this
time round is that the Federal Reserve will be “tightening into an overvalued
market,” the strategists led by Savita Subramanian wrote in a note. “The
S&P 500 is more expensive ahead of the first rate hike than any other cycle
besides 1999-2000...” Story at...
https://finance.yahoo.com/news/bank-america-strategists-warn-fed-162547371.html
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 0.8% to 4329.
-VIX rose about 5% to 31.98.
-The yield on the 10-year Treasury slipped to 1.732%.
Pullback Data:
Days since top: 42 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 9.8% at close. Max at close: 11.9%
(Avg.= 13% for non-crash pullbacks)
The S&P 500 is 3.1% below its 200-dMA & 4.4%
below its 50-dMA.
The slope of the 200-dMA is up, but not by much.
On Friday’s I summarize a number of indicators to get a
weekly feel for trend.
The Friday run-down of some important indicators continued
to trend toward the bullish side. (11-bear and 9-bull); this is close to
Neutral overall. 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 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.
-MACD of S&P 500 price made a bearish crossover, 2
March.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-Short-term new-high/new-low data is rising.
-My Money Trend indicator is headed higher.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
-15 February, the 52-week, New-high/new-low ratio
improved by 4.2 standard deviations – Bullish.
-Smoothed Buying Pressure minus Selling Pressure is turning
up.
NEUTRAL
-There have been 2 Distribution Days in the last week.
- Issues advancing on the NYSE (Breadth) ahead of the
S&P 500 Index, but not currently sending a signal.
-The S&P 500 is 3.4% below 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.
-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 8 up-days over the last 20 sessions –
leaning bullish, but neutral.
-There have been 3 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
-McClellan Oscillator (+1).
-The Smart Money (late-day action) is neutral. (This indicator
is based on the Smart Money Indicator developed by Don Hayes).
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.
-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 57 consecutive days. (3 days in a row is my bear signal)
-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 11 bear-signs and 9 bull-signs. Last week, there were 13 bear-signs and
8 bull-signs.
Two weeks ago, there were 17 bear signs; last week 13 and
now 11. The S&P 500 is about at the level it was 2 weeks ago. We’re seeing
a slow improvement in indicators while the Index has gone nowhere. That’s a
good sign; it suggests that the correction is losing steam, but there are still
no signs that it is over.
The daily sum of 20 Indicators remained +5 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations improved from +10 to +19 (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. VIX is bearish; Volume & Sentiment are Neutral;
PRICE is bullish and the New-High/New-Low change-in-spread indicator is bullish
based on the 25 Feb swing in new-high/new-low data.
I’m still waiting for another retest. That’s when we’ll get more information about
this correction and where we go from there.
In the absence of a retest, I’ll have to see rapid
improvements in price and internals along with bullish divergences. We’ve not
seen that yet.
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.
*For additional background on
the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
I re-established a position in
the XLE ETF Tuesday. It is hanging in there and I may have been hasty in
selling the position.
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.
