Trump & the Supreme Court ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
I was traveling Tuesday afternoon through the Outer Banks of North Carolina. The drive was mostly uneventful even though winds were gusting over 40 mph. A couple of hours later the front passed through here in Virginia. I was working on the Blog when the transformer in the neighborhood went out with a blue flash. Power failed so Tuesday’s blog is here on Wednesday morning.
 
VIRGINIA SUPPORTING SUPREME COURT REVIEW OF TRUMP’S ELIGIBILITY (Virginian Pilot)
“The amicus brief was initiated by attorneys general for West Virginia and Indiana but a total of 27 attorneys general and the Arizona state legislature have signed on. They collectively argued the high court’s immediate intervention was required as the Colorado court’s decision [to remove Trump from the Colorado ballot] “will create widespread chaos. Our country needs an authoritative, consistent, and uniform answer to whether former President Trump is constitutionally eligible for President. Granting the Petition would at least be a step in that direction...” Story at...
Virginia is among states supporting a Supreme Court review of Trump’s ballot eligibility (msn.com)
My cmt: The Colorado trial was a week long.  Did prosecutors present enough evidence to prove that Trump participated in an insurrection? I’ve read enough to believe he did; but reading stories in the newspaper, even if they were unbiased, isn’t the same as evidence presented in court. While I am convinced that Trump is responsible for phony slates of Electoral College voters from multiple states, is that enough to declare him ineligible? A big question remains to be answered: What was Trump’s role in the 6 January riot?  There have been reports that Trump’s team communicated with the Proud Boys and Oath Keepers before and during the riot. To my knowledge, the specifics of these contacts have not been made public. Inquiring minds want to know.
 
BULL MARKET CONTINUES (Heritage Capital)
“Coming into the new week [starting 8 Jan], I fully expect the bulls to put up a stand. What I can’t say yet is the magnitude of the expected bounce. Could it go back to the old highs? Sure. Could it stop around 4750? Sure. I would be surprised if we didn’t get any bounce at all... I remain in the smaller decline camp, for now [rather than larger declines predicted by some].” – Paul Schatz, President Heritage Capital.
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped about 0.2% to 4757.
-VIX dipped about 2% to 12.76.
-The yield on the 10-year Treasury slipped to NO DATA
 
PULLBACK DATA:
-Drop from Top: 0.8%. 25.4% max (on a closing basis).
-Trading Days since All-Time Top: 506-days. (The top was 3 January 2022.)
The S&P 500 is 8.7% ABOVE its 200-dMA and 4.2% ABOVE its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new all-time-high; however, the major bear-market bottom of the 25% decline was in the 3600 area and we called a buy on 4 October 2022.
 
MY TRADING POSITIONS:
XLK – Technology ETF (holding since the October 2022 lows).
XLY - Consumer Discretionary ETF. (Holding since the October 2022 lows - I bought more XLY 8/21/23.)
INTC – Added 12/6/2023.
 
BA – Added 12/6/2023.
DWCPF - Dow Jones U.S. Completion Total Stock Market Index. – Added 12/7/2023. This is a large position in my retirement account betting on Small Caps.
 
TODAY’S COMMENT:
Same as yesterday: The summary of indicators last Friday was 10-bear and 10-bull for a spread of zero. The spread is still zero today, (as it was Monday) so I can’t say the mild pullback we have been observing is over.
 
I said last Thursday, “The 50-dMA is now 4531.  It is not likely that the S&P 500 will fall that far; the 50-dMA is rising so my guess for worst case pullback is still in the 4550-4600 area...”
 
When we look at a longer-term chart, going back to the October 2022 lows for example, it does look like this pullback could fall to mid-4500’s. That does line up with the 50-dMA; it is now 4564.
 
That still doesn’t mean that the FOMO crowd won’t move in early and drive the markets up tomorrow. They could, but so far the market internals do not suggest it. With a spread of zero for the “Summary of Indicators” indicator (does that make sense?) we are just guessing at this point and I am waffling about where the market will go. 
 
If I had to guess (and it is mostly a guess) I think markets still need to pullback to near the lower trend line and reset.
 
The daily spread of 20 Indicators (Bulls minus Bears) declined from zero to -2 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from +20 to +8. (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 bullish; VIX, VOLUME & SENTIMENT are neutral.
 
(One warning: The Long-Term Indicator is not a good top-indicator. It can signal BUY at a top.)
 
(The important major BUY in this indicator was on 21 October 2022, 7-days after the bear-market 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 21 December, 9 sessions before the high of this recent bear market, based on the bearish “Friday Rundown” of indicators.)
 
BOTTOM LINE
I don’t try to time the market for short-term minor pullbacks so I remain bullish. We still seem to be in a routine pullback to the lower trend line. A decline of about 4% from Tuesday’s close would be perfectly normal.
 
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 remained HOLD. (My basket of Market Internals is 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 65% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. I’m “over invested” now expecting new, all-time highs this year. That burns all the cash.  I have about 25% of the portfolio in bonds.
 
I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. When I see a definitive bottom, I add a lot more stocks to the portfolio using an S&P 500 ETF as I did back in October.