“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
FOMC RATE DECISION (Yahoo Finance)
“The U.S. Federal Reserve raised interest rates by 0.75%
for the third consecutive time as the central bank continues to try to tame
multi-decade highs in inflation...Fed officials expect to raise rates higher
than before and keep them at that level for longer. Officials see the fed funds
rate rising to 4.4% by the end of this year and 4.6% by the end of 2023. That’s
up from 3.4% for this year and 3.8% previously.” Story at...
https://finance.yahoo.com/news/fed-meeting-rates-093718367.html
EXISTING HOME SALES (Yahoo Finance)
“Sales of previously owned homes declined for the seventh
straight month in August, as rising mortgage rates priced out more would-be
buyers from the market. But the volume exceeded expectations.
Contract closings fell 0.4% in August from July...”
Story at...
https://finance.yahoo.com/news/existing-home-sales-140133672.html
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the
previous week. At 430.8 million barrels, U.S. crude oil inventories are about
2% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
DON’T BELIEVE THE HYPE ABOUT ANTARCTICA’S MELTING
GLACIERS (WSJ)
“Two studies carefully explore the factors at play, but
the headlines are only meant to raise alarm. Each year, some 2,200 gigatons (or
0.01%) of the ice is discharged in the form of melt and icebergs, while
snowfall adds almost the same amount. The difference between the discharge and
addition each year is the ice sheet’s annual loss. That figure has been increasing
in recent decades...But the increase is a small change in a complex and highly
variable process...And while the Antarctic losses seem stupendously large, the
recent annual losses amount to 0.001% of the total ice and, if they continued
at that rate, would raise sea level by only 3 inches over 100 years... These
papers describe the science with appropriate precision and caveats, but it is a
shame that the media misrepresents the research to raise alarm.” – Stephen
Koonin, PhD, professor
at New York University, a senior fellow at the Hoover Institution and author of
“Unsettled: What Climate Science Tells Us, What It Doesn’t, and Why It
Matters.”
Opinion at...
https://www.wsj.com/articles/dont-believe-the-hype-about-antarcticas-melting-glaciers-ice-sheet-climate-change-global-warming-sea-levels-greenland-iceberg-ocean-11663618509
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell about 1.7% to 3790. (3800
has been sticky; today the Index broke thru.)
-VIX rose about 3% to 27.97.
-The yield on the 10-year Treasury slipped to 3.527%.
PULLBACK DATA:
-Drop from Top: 21% as of today. 23.6% max (on a closing
basis).
-Trading Days since Top: 180-days.
The S&P 500 is 10.8% Below its 200-dMA & 6.2%
Below its 50-dMA.
Support looks like the prior low, 3667.
*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.
I have built these positions to significantly large
values, although I am still not net short.
TODAY’S COMMENT:
The Fed announced their decision to hike by 75-basis points
at 2pm.
Markets were confused, but in the end, they didn’t like the
announcement. The problem wasn’t the 75-basis point hike, it was expected, but
now the Fed expects the fed funds rate to be 4.4% by the end of
this year and 4.6% by the end of 2023. That was higher than the expected 3.4%
for this year and 3.8% for 2023.
Jeffrey Gundlach, DoubleLine Capital CEO, was on the CNBC show in the 4-5pm hour,
“Closing Bell: Overtime.”. He said the market is better than the Fed at
predicting recession. He continued, “...now, the market
is predicting a recession...the odds of a recession are 75%.” The depth of the
recession depends on what the Fed does.
If they only go 50 or 75-basis pts. higher, we could see a shallow
recession. If they keep hiking, it could be “a deep recession.” He predicted a
bottom on the S&P 500 around 3400.
There was ANOTHER Distribution Day today,
Wednesday. That makes 11 in the last 25
sessions. 6 is considered bearish, so this is very bearish. “A distribution day is when a
market representative index...[in my case the S&P 500] loses more than 0.2%
in a trading session, with volume higher than that of the previous session.” - https://marketsmithindia.com/post/is-this-a-market-top-distribution-days-give-an-idea
Distribution Days are thought to indicate that the big money
is selling.
Wednesday was also a Bearish Outside Reversal Day. “An
outside reversal is a price pattern that indicates a potential change in trend
on a price chart. The two-day pattern is observed when a security’s high and
low prices for the day exceed the high and low of the previous day’s trading
session.” For more, see....
https://www.investopedia.com/terms/o/outsidereversal.asp
We’ve been in a downtrend since mid-August. This signals more of the same.
Today, the daily sum of 20 Indicators declined from -9 to
-11 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations declined from +4 to -18. (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 improved to HOLD (but just barely): the Panic Indicator and
VOLUME are bearish; SENTIMENT, VIX & PRICE are neutral. I 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 have been saying for a while that I think we remain in
a selling stampede. Maybe-maybe not. Selling stampedes usually last 17 – 25
sessions, with only 1.5-to three-day pauses/throwback rallies, before
they exhaust themselves on the downside. As of today, this downturn has lasted
25-days, but we might need to start a new count since we did recently have 4
up-days in a row. I think I’ll quit tracking this if there isn’t a bounce soon –
but then, I don’t really expect a bounce.
We haven’t seen a waterfall straight-down move yet. That is probably coming at some point, but I
don’t have a prediction as to when that might happen.
I’m a Bear; a retest of the prior lows (or close to the
lows) seems likely.
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
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
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
My basket of Market Internals slipped to SELL.
(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.
