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“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
RALLY WILL MAKE FURTHER GAINS (MSN.COM)
“Current sentiment indicators show that investors' fear of missing out on the current stock market rally could drive further gains ahead, according to a note from Ned Davis Research. The research firm highlighted that its internal crowd sentiment poll, which fell in mid-June to bearish levels not seen since December 2018 and early 2016, has partially recovered but still remains far from excessively optimistic...The combination of FOMO among investors, improving macro data in the form of better than expected second-quarter earnings results, and bullish technicals means the stock market rally could extend further for several more weeks.” Story at... 
FOMO among investors will power the current stock market rally to further gains, Ned Davis research says (msn.com)
I have posted a number of bearish pieces on the rally, the above is a bullish one. The Pro bulls and bears seem to be about equally split when it comes to the rally. To me, it looks more likely that the rally is starting to fail. 
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 1.2% to 4228.
-VIX rose about 5% to 20.60.
-The yield on the 10-year Treasury rose to 2.973%.
 
PULLBACK DATA:
-Drop from Top: 11.8% as of today. 23.6% max.
-Trading Days since Top: 158-days.
The S&P 500 is 2.1% Below its 200-dMA & closed 6.6% Above its 50-dMA.
-Resistance points for the rally, are: (1) 4321 & 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 Tuesday, 16 August. 50% is about what we normally see in bounces during corrections, but that is only a rough guide. 62% is a Fibonacci retracement level.
 
*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.
SDS, 2x short S&P 500 ETF. (Added today. It’s a relatively small position to start.  I’ll add more if we see more negative action next week.)
 
TODAY’S COMMENT:
On Fridays, I summarize a number of indicators to get a weekly feel for trend. Bull signs dropped and bear signs increased. As a result, they are about neutral now (9-bear and 10-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
-The 10-dMA % of issues advancing on the NYSE (Breadth) is above 50%.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50.
-MACD of S&P 500 price made a bullish crossover 24 June.
-Long-term new-high/new-low data.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is Bullish.
-The size of up-moves has been larger than the size of down-moves over the last month.
-VIX.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are both ABOVE the 20-dEMA.
-Slope of the 40-dMA of New-highs is rising. This is one of my favorite trend indicators.
-55% of the 15-ETFs that I track have been up over the last 10-days.
 
NEUTRAL
-Sentiment.
-Bollinger Bands, but were close to overbought this week.
-RSI
-The short-term, 10-day, Fosback Hi-Low Logic Index.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50% ending its streak of consecutive days. (3 days in a row is my “correction-now” signal)
-There was a Distribution Day 19 Aug, but 1 is not enough to send a signal.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The graph of the 100-day Count (the 100-day sum of up-days) is flat.
-There have been 10 up-days over the last 20 sessions –neutral.
-There have been 5 up-days over the last 10 sessions – neutral.
-Cyclical Industrials (XLI-ETF) are out-performing the S&P 500, but falling so I’ll call it neutral.
-Overbought/Oversold Index (Advance/Decline Ratio).  
-There have been 2 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-The S&P 500 is 2.1% below its 200-dMA. (Bull indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-There was an Inverse Zweig Breadth Collapse (negative Breadth Thrust) 21 June. That’s a rare, very-bearish sign, but it was several-weeks ago.
-The 52-week, New-high/new-low ratio improved by 0.7 standard deviations on 15 July – too small to send a signal.
-There was a Hindenburg Omen signal 8 April – it was canceled when the McClellan Oscillator turned bullish.
-The Calm-before-the-Storm/Panic Indicator.
-1 July was a Bullish Outside Reversal Day – expired.
-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
-There was a 90% Up-volume day 10 August – expired.
 
BEAR SIGNS
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is below 50%
-Buying Pressure minus Selling Pressure is falling.
-My Money Trend indicator is falling.
-Short-term new-high/new-low data.
-McClellan Oscillator is negative.
-The Smart Money (late-day action) is headed down.
-The smoothed advancing volume on the NYSE is falling.
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bearish crossover 9 Aug.
-S&P 500 is underperforming the Utilities (XLU).
 
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 9 bear-signs and 10-Bull. Last week, there were 3 bear-signs and 19 bull-signs.
 
That’s a fair amount of deterioration in a week.
 
Crypto currencies were down around 10% today.  I think this is an indicator for the stock market - it looks like risk-off for now.  Carter Worth, Worth Charting, was on CNBC, yesterday. He had a research note out that said “Sell Apple.” Apple is a bell-weather for the markets (it’s around 7 or 8% of the S&P 500).  If Carter is correct, the markets as a whole are likely to fall along with Apple.
 
We still see breadth signals warning of a top: the 100-dMA of issues advancing on the NYSE remains below 50% and is now starting to slide down. If that trend continues, it will confirm the end of the rally.

Today, the daily sum of 20 Indicators dropped from +11 to +4 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations slipped from +131 to +126. (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 BUY: VIX & PRICE are bullish; SENTIMENT & VOLUME are neutral. 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.”
 
I’m a Bear longer-term; short-term; now I am getting Bearish in the short-term too. We have a number of suggestions that the rally is failing. A retest of the prior lows is likely. I added another short via SDS, 2xShort S&P 500 ETF.
 
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)

*For additional background on the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
Looking at the above chart, 80% of the ETFs are above their 120-dMA. That chart looks like there is no correction.
 
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)

My basket of 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 most useful when they diverge from the Index.) 
 
 

My stock-allocation in the portfolio is now roughly 30% 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.