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“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
On the road again so this is an abbreviated post.
HOUSING STARTS / PERMITS (Reuters)
“U.S. homebuilding fell to the lowest level in nearly
1-1/2 years in July, weighed down by higher mortgage rates and prices for
construction materials, suggesting the housing market could contract further in
the third quarter.
The report from the Commerce Department on Tuesday also
showed permits for future home construction slipping to a 10-month low, with
the decline concentrated in the single-family housing segment... Housing starts
plunged 9.6%” Story at...
https://www.reuters.com/markets/us/us-housing-starts-tumble-july-building-permits-fall-2022-08-16/
INDUSTRIAL PRODUCTION (digital journal)
“A solid rebound in American manufacturing, especially
vehicles, following two months of declines, help push overall industrial
production up in July, the Federal Reserve said Tuesday. A massive 6.6 percent
surge in motor vehicle and parts production was a key driver the 0.7 percent
rise in manufacturing...” Story at...
https://www.digitaljournal.com/business/us-industrial-output-jumps-in-july-on-solid-manufacturing-gain/article#ixzz7c90KBBU2
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.2% to 4305.
-VIX dipped about 1% 19.53.
-The yield on the 10-year Treasury rose to 2.820%.
PULLBACK DATA:
-Drop from Top: 10.2% as of today. 23.6% max.
-Trading Days since Top: 155-days.
The S&P 500 is 0.5% Below its 200-dMA & closed 8.7%
Above its 50-dMA.
-Resistance points for the rally, are: (1) 4328 &
4350, the 200-dMA & upper longer-term trend line, respectively; (2) or
4370, the 62% Fibonacci retracement point for those who believe in that sort of
thing.
The S&P 500 closed at its 57% retracement level. 50%
is about what we normally see in bounces during corrections, but that is only a
rough guide.
*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:
SH, short the S&P 500 ETF. Can’t seem to trim my short position, but
instead, I am trading against it with SSO.
SSO, 2xLong S&P 500 ETF.
TODAY’S COMMENT:
RSI is still overbought; Bollinger Bands are still not so
I’ll ignore these indicators for now.
It’s going to take a one day big move up, say in the 1%+ range
to trip the Bollinger Band signal to bearish. In that case, RSI would remain bearish
too, if a big move were to happen soon.
Today, there was high unchanged-volume. As I’ve often
said, 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 has always been that it is
frequently a false signal. If the indicator is sending a decent signal, it is
suggesting a reversal down. It certainly wouldn’t be a surprise to see markets
fail here.
The S&P 500 is only 0.5% below its 200-dMA. That’s a major resistance point.
Today, the daily sum of 20 Indicators rose from +14 to +16
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +111 to +121. (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. With a more bullish 10-dMA, the call is muddied regarding
whether the Index made a top on 9 August.
LONG-TERM INDICATOR: The Long
Term NTSM indicator remained BUY: SENTIMENT, VIX, PRICE & VOLUME are
bullish. I still expect the S&P 500 to test its prior low of 3667. Remember
for the longer-term, one indicator trumps them all – “Don’t fight the FED.”
The key indicators remain Bollinger Bands and RSI. When
they are both overbought, it will be time to close out long, trading-positions.
I’m a Bear longer-term; short-term, the bulls are back in
control of the markets.
TUESDAY MARKET INTERNALS (NYSE
DATA)
My basket of Market Internals improved to BUY.
(Market Internals are a decent trend-following
analysis of current market action, but should not be used alone for short term
trading. They are most useful when they diverge from the Index.)
My stock-allocation in the
portfolio is now roughly 40% invested in stocks, although technically, SSO
isn’t a stock, but an options-based ETF.
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.
