“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.
NFIB SMALL BUSINESS OPTIMISM
The NFIB Small Business Optimism Index fell 0.1 point in
May, measuring 93.1.
Story at...
PPI (CNBC)
“The producer price index, a measure of the prices paid
to producers of goods and services, rose 0.8% for the month and 10.8% over the
past year. The monthly rise was in line with Dow Jones estimates and a doubling
of the 0.4% pace in April. Excluding food, energy and trade, so-called core PPI
rose 0.5% on the month, slightly below the 0.6% estimate but an increase from
the 0.4% reading in the previous month. On a year-over-year basis, the core
measure was up 6.8%, matching April’s gain.” Story at...
MY BIGGEST TAKEAWAY FROM DAY 2 OF THE JAN 6 COMMITTEE (msn.com)
“...the committee described how Mr. Trump and his
campaign aides used baseless claims of election fraud to convince the
president’s supporters to send millions of dollars to something called the
“Election Defense Fund.”... But a committee investigator said there is no
evidence that such a fund ever existed. Instead, millions of dollars flowed
into a super PAC that the president set up on Nov. 9, just days after the
election.” Story at...
4
Takeaways From Day 2 of the Jan. 6 Hearing (msn.com)
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 fell about 0.4% to 3750.
-VIX fell about 4% to 32.69.
-The yield on the 10-year Treasury rose to 3.480%
PULLBACK DATA:
-Drop from Top: 22.1% as of today. 22.1% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 112-days. (Avg= 30 days top to
bottom for corrections <10%; 60 days top to bottom for larger, non-crash
pullbacks)
The S&P 500 is 15.7% BELOW its 200-dMA & 10.3%
BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500
makes a new-high; however, we hope to be able to call the bottom when we see
it.
MY TRADING POSITIONS:
XLE*
*I’m considering selling XLE on a bounce. If the market falls much farther, I suspect
investors will throw out everything, including issues that have held up well during
the decline. In addition, Biden’s trip to Saudi Arabia next month may pressure
oil prices.
TODAY’S COMMENT:
As the chart above shows, there is little support below current levels on the S&P 500. The Index is likely to fall into the 3500-3300 range before it bottoms and, of course, there’s no guarantee that the decline will stop there. My guess is that it will fall well below those levels, but I am guessing there will be a recession. On that point, all we can do is wait.
Currently, it looks like we have a bounce coming. Bottom indicators (Bollinger Bands along with
others) are flashing. Today wasn’t the
bottom – but the bottom indicator has signaled bounces in the recent past in
the 3-7% range.
The FED will announce tomorrow at 2PM. A 75-basis point
(3/4%) rate hike in FED funds is now expected.
In fact, the change in Fed expectation (due to the weak CPI news) last
week was responsible for the sudden drop that left me on the wrong side of a
leveraged trade. (I still would like to
reclaim those losses before the markets bottom. Even if I don’t, I will still
come out well ahead when we “buy-the-bottom” or at least near the bottom.)
The past 2 FED meetings have not surprised the markets
and the S&P 500 closed strongly higher on the second day of each the prior
two FED meetings. We need to go all the way back to 26 Jan to find a day when
the markets didn’t like the FED message.
I think a FED hike of 3/4% is expected and I am looking
for a bounce tomorrow.
Today, the daily sum of 20 Indicators remained -4 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations dropped from +89 to +70. (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 20 indicators are short-term so they tend to bounce
around a lot.
LONG-TERM INDICATOR: The Long
Term NTSM indicator remained SELL: PRICE and SENTIMENT are neutral; VOLUME and
VIX are bearish.
I’m a Bear, but I expect a bounce of some kind soon.
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
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
TUESDAY 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 roughly 35% invested in stocks.
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.
