Consumer Confidence ... Chicago PMI ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 “Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“The Wall Street Journal reports that the Energy Department has concluded [based on a classified intelligence report] that the COVID pandemic most likely arose from a laboratory leak...the most alarming aspect was the censorship, not the science. As late as May 2021, the New York Times’ Science and Health reporter Apoorva Mandavilli was calling any mention of the lab theory as “racist.” She embodies the model of the new “advocacy journalism” at the Times. Reporters who remained wedded to the dated view of objective journalism were purged from the ranks of The Times long ago.” - Jonathon Turley, attorney and a professor at George Washington University Law School.
 
CONSUMER CONFIDENCE (Conference Board)
The Conference Board Consumer Confidence Index decreased in February for the second consecutive month. The Index now stands at 102.9 (1985=100), down from 106.0 in January (a downward revision)...Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more...And, while 12-month inflation expectations improved—falling to 6.3 percent from 6.7 percent last month—consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates.” Report at... 
https://www.conference-board.org/topics/consumer-confidence/press/CCI-Feb-2023
 
CHICAGO PMI (fxEmpire)
“The report indicated that Chicago PMI declined from 44.3 in January to 43.6 in February, compared to analyst consensus of 45. Chicago PMI is declining for the second month in a row.” Story at...
https://www.fxempire.com/news/article/cb-consumer-confidence-misses-expectations-sp-500-remains-under-pressure-1296969
 
WHAT’S CAUSING INFLATION (msn.com)

“According to Shapiro’s work [at the San Francisco Federal Reserve Bank], inflation for components categorized as supply-driven for the month of December amounted to 2.3% and for demand components 1.7%. Components that are not clearly affected by either supply or demand are categorized as ambiguous and given their own inflation number... “I think what the series is actually most beneficial at is it helps tell the story of how the supply and demand shocks have evolved over the pandemic and that it’s not just one or the other,” Shapiro said.” Story at...
Confused about what’s causing inflation? This metric shows what’s driving the price rise. (msn.com)
My cmt: The Fed can slow demand by raising rates and slowing the economy; but the above chart shows that a lot of the inflation is supply driven. I don’t see how the Fed can increase supply.
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 0.3% to 3970.
-VIX dipped about 1% to 20.69.
-The yield on the 10-year Treasury was little changed at 3.924%.
 
PULLBACK DATA:
-Drop from Top: 17.2% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 289-days.
The S&P 500 is 0.8% ABOVE its 200-dMA & 0.2% BELOW 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.
 
MY TRADING POSITIONS:
QLD – 2xNasdaq 100 (added today)
 
SSO – 2x S&P 500
XLK – Technology ETF.
XLE – Energy Sector ETF. It hasn’t been doing much recently, but Russia is cutting production and that should help the sector.  We have a good dividend in the meantime.
BA – (Boeing) I am late on this one, but we’ll see.
XLY - Consumer Discretionary ETF.
 
SHY – Short term bonds. 30-day yield is 4.2%. (Trailing 1-year yield is 1.3%.) I’ll hold this, but if the market retests the lows, I’ll sell it and buy stocks.)
 
TODAY’S COMMENT:
Is the rally running on empty? Internals were very good all day while the S&P 500 price fluctuated. In the end, internals were leaning negative and the Index went down.
 
As we observed yesterday, Consumer Discretionary (XLY) outperformed the S&P while Utilities (XLU) sold off. Cyclical Industrials (XLI) slightly outperformed as well. Volume picked up late in the day and total volume for the day was about 20% above the monthly average. All of this suggests that today may have been heavily influenced by end of month adjustments by mutual funds and traders.
 
RSI was oversold (bullish), but Bollinger Bands were not.
 
Today, (Tuesday) unchanged volume was very 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; however, the last 2 times we saw this indicator near the lower trend line, (as it is now) the S&P 500 bounced higher. I don’t use this indicator in my system, but now, it does look bullish.
 
Here's another indicator I track, but I don’t use in my system. The chart shows the spread between Junk Bonds and the S&P 500 measured as % change in price. The upward sloping spread (red line) indicates a bullish divergence. The Black line is the S&P 500.
 
All in all, today’s action doesn’t affect my thinking – I remain bullish and heavily invested in stocks.
 
Today, the daily spread of 20 Indicators (Bulls minus Bears) declined from +5 to +1 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from +12 to +5. (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 HOLD: PRICE is positive; VIX & SENTIMENT are neutral.  VOLUME was negative.
 
(The important BUY in this indicator was on 21 October, 7-days after the bottom. For my NTSM overall signal, I suggested that a short-term buying opportunity occurred on 27 September (based on improved market internals on the retest), although without market follow-thru, I was unwilling to call a buy; however, I did close shorts and increased stock holdings. I issued a Buy-Signal on 4 October, 6-days before the final bottom, based on stronger market action that confirmed the market internals signal. The NTSM sell-signal was issued 20 December, 8 sessions before the high of this recent bear market, based on the bearish Friday rundown of indicators.)
 
Bottom line: I remain a BULL, although somewhat more cautious.
 
ETF - 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
 
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 declined 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 current invested position is about 75% stocks, including stock mutual funds and ETFs. I’m usually about 50% 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.