CPI ... NFIB Small Business Optimism ... Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
CPI (Yahoo Finance)
Consumer prices rose less than expected in November, the second-straight month inflation pressures moderated more than anticipated by economists. The Consumer Price Index (CPI) for November showed a 7.1% increase in prices over last year and a 0.1% increase over the prior month...” Story at...
https://finance.yahoo.com/news/november-cpi-inflation-rises-71-over-last-year-141704528.html
 
NFIB SMALL BUSINESS OPTIMISM (NFIB)
“NFIB’s Small Business Optimism Index declined 0.8 points in October to 91.3, which is the 10th consecutive month below the 49-year average of 98. Thirty-three percent of owners reported that inflation was their single most important problem in operating their business...“Owners continue to show a dismal view about future sales growth and business conditions, but are still looking to hire new workers,” said NFIB Chief Economist Bill Dunkelberg. “Inflation, supply chain disruptions, and labor shortages continue to limit the ability of many small businesses to meet the demand for their products and services.” Press release at...
http://www.nfib-sbet.org/
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.7% to 4020, but it had been much higher at the open due to the better than expected CPI number.
-VIX fell about 9% to 22.68.
-The yield on the 10-year Treasury dropped to 3.513%.
 
PULLBACK DATA:
-Drop from Top: 16.2% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 238-days.
The S&P 500 is 0.3% BELOW its 200-dMA & 4.3% ABOVE its 50-dMA.
 
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area and I am fully invested with a higher percentage of stocks than normal.
 
MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.
 
XLI – Industrial ETF (XLI still looks good to me. Nearly 10% of XLI is in Boeing and Caterpillar and they are both strong performers in the DOW momentum analysis.) 
QLD – 2x Nas 100
DDM – 2x Dow 30.
XLK – Technology ETF
 
CVX – (I may hold this as a long-term position. I already owned a small position in CVX.)
 
TODAY’S COMMENT:
So far, the Bollinger Squeeze looks like it was correct in calling for an increase in volatility.  Now let’s see what the FED says Wednesday. In the mean time, here’s an indicator for your consideration.
 
One of the simplest indicators for determining oversold / overbought conditions is simply counting the number of up-days in a given stretch of time. I report these numbers every Friday for the most recent 10- and 20-day periods. This past Friday and Monday, there had only been 7 up-days in the last 20 trading-days.  That’s an oversold, bullish sign based on my analysis. 
 
What I don’t usually report is the 100-day period. A number less than 47 is generally an oversold signal (again, my analysis), but as often stated, oversold conditions can remain for a long time.  The first reading in the current correction less than 47 occurred a few days before April Fool’s day. That’s appropriate since that was about 6-months before the bottom, and hopefully, only fools were buying. 
 
It’s curious now though; as of this past Friday, there have only been 41 up-days in the last 100-days. That’s even lower than we saw in the great Recession and lower than any of my data going back to 2006. To put it in context, when the S&P 500 bottomed in March of 2009 after a 57% drop, there had only been 47 up-days in the prior 100-days.   From the top in October of 2007 to the bottom in March of 2009 there was only 1 day when there were 45 up-days in any 100-day period and that was the lowest reading during the pullback.
 
The point of this geeky analysis is to point out that markets are incredibly oversold and investors are now more freaked out than they were after the S&P 500 had fallen 57% during the Great Recession.
 
The path of least resistance is higher and despite the constant calls for new lows, there is currently no evidence for such a retreat.
 
Today (Tuesday) unchanged volume was high. As I’ve often said, many believe that this indicator suggests investor confusion at market turning points. My problem is that it is frequently a false signal. Not much has happened the last 3 times we’ve seen this indicator. The S&P 500 is near its lower trendline and has gone sideways for more than a month; I’ll say this is a bullish sign. I suspect the argument could be made that it is bearish.
 
There is a FED meeting announcement on Wednesday.  The Bollinger Squeeze last week predicted a big move in the markets – we almost got it Tuesday. Maybe we’ll have a bigger move Wednesday.
 
Today, the daily sum of 20 Indicators improved from +13 to +18 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +125 to 134. (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: SENTIMENT is neutral; VOLUME, VIX, & PRICE are bullish.  (The important Buy signal from this indicator ensemble was 21 October (7 days after the low); my first buy indication was on 27 September (2% above the low) based on analysis of retests of the June low.)
 
Bottom line: I remain a Bull. I’ll take profits in the leveraged positions if there is weakness.
 
As previously noted, I think the bottom was 3577 on 12 October. There is always the possibility that the markets could retest those lows, but it seems unlikely that a retest will occur in 2022.
 
I’m now invested with about 75% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) 75% stocks is uber-bullish and that’s as far as I’ll go.
 
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

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)
DOW 30 momentum ranking follows:

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)

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 current invested position is about 75% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. I’ll cut back on stocks if we see serious bear signs.
 
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.