Durable Orders ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

"I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America...And I doubt very much that any reader of this letter will have a different experience in the future." – Warren Buffet, shareholder letter.
 
“The Supreme Court hears one of the most consequential separation-of-powers cases in American history on Tuesday when it considers President Biden’s unilateral student loan write-off. The question is nothing less than whether the President can steal Congress’s power of the purse and act like a King.” – WSJ Editorial Board.
 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
DURABLE ORDERS (Reuters)
“New orders for key U.S.-manufactured capital goods increased by the most in five months in January while shipments of those so-called core goods rebounded, suggesting that business spending on equipment picked up at the start of the first quarter...New orders for key U.S.-manufactured capital goods increased by the most in five months in January while shipments of those so-called core goods rebounded, suggesting that business spending on equipment picked up at the start of the first quarter.” Story at...
https://www.reuters.com/markets/us/us-core-capital-goods-orders-accelerate-january-2023-02-27/
 
EARNINGS (FactSet)
“With 82% of S&P 500 companies reporting results for Q4 2022 to date, aggregate earnings reported by these companies have exceeded estimated earnings by 1.3%. How does this earnings surprise percentage compare to recent averages? The earnings surprise percentage for Q4 2022 is below the 1-year average (+3.7%), below the 5-year average (+8.6%), and below the 10-year average (+6.4%).
In fact, the fourth quarter currently marks the second-lowest earnings surprise percentage reported by the index since Q4 2008, trailing only Q1 2020 (+1.1%). It also marks the seventh consecutive quarter in which the EPS surprise percentage for the index has decreased. Report at...
https://insight.factset.com/sp-500-companies-are-reporting-smaller-eps-surprises-for-7th-straight-quarter-in-q4?_ga=2.150632112.743530742.1677385973-1279003839.1673999577&_gac=1.180230486.1677385973.Cj0KCQjwhsmaBhCvARIsAIbEbH7Q7NBZbdr9ETvcmI_93_TwPm8ZjT78St2MJ__6E43gyC3KFNNl2pkaAuCZEALw_wcB&_gl=1*1rif377*_ga*MTI3OTAwMzgzOS4xNjczOTk5NTc3*_ga_2Q3PTT96M8*MTY3NzM4NTk3My4yLjAuMTY3NzM4NTk3My4wLjAuMA..
 
RECESSIONCOUNTDOWN BEGINS (RIA)
“...we must acknowledge the “possibility” of Goldman Sachs’ view of a soft landing. However, as we will discuss next, the “probabilities” of a recession seem far more significant...
...The recession countdown has started, but given the massive amount of liquidity still in the system, a recession may take longer to manifest itself this time. Such is why using the “yield curve” as a “market timing” tool is unwise. However, dismissing yield curve inversions entirely is just as foolish. History has not been kind to those that do.”
https://realinvestmentadvice.com/newsletter/
My cmt: So far, the stock market has suggested that the recession (if it occurs) may be pretty far off. Let’s hope the market keeps sending that signal. If it does, the S&P 500 must hold its 200dMA.
 
BEARS TESTING THE DOWNSIDE (Heritage Capital, Friday, 24 Feb)
“Right now, stocks have pulled back roughly 5% and that’s about the extent of what I see if my strongly bullish thesis is to continue to play out. In other words, I want to see the stock market find a low early next week and then strongly rally to the end of Q1.” – Paul Schatz, President, Heritage Capital.
https://investfortomorrow.com/blog/bears-testing-the-downside/
 
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.3% to 3970.
-VIX dropped about 3% to 21.67.
-The yield on the 10-year Treasury dipped to 3.923%.
 
PULLBACK DATA:
-Drop from Top: 17.0% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 283-days.
The S&P 500 is 1.1% ABOVE its 200-dMA & 0.1% 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.
 
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:
Today was constructive for the markets.  The S&P 500 stayed above its 200-dMA and bounced above its 50-dMA. Chart wise, these are important steps. There were other good signs, too. Cyclical Industrials (XLI) and Consumer Discretionary (XLY) both outperformed the S&P 500 while Utilities (XLU) sold off.  Those are bullish signs.  
 
I think markets go higher and make new highs; but the Mr. Market doesn’t listen to me.  We could always see a retest of the prior lows, so I’ll be vigilant in watching indicators for possible reversals.  
 
Today, the daily spread of 20 Indicators (Bulls minus Bears) improved from zero to +5 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations improved from +6 to +12. (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

MONDAY 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 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.