ISM Non-Manufacturing ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...
“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Far
more money has been lost by investors in preparing for corrections, or
anticipating corrections, than has been lost in the corrections themselves.” -
Peter Lynch, former manager of Fidelity’s Magellan® fund.
GOOD RIDDANCE TO BAD TAX BILL (WSJ)
“The Senate blocked a bipartisan tax measure on Thursday,
and the headlines will shout that the GOP denied cash for children in poverty.
But Republicans deserve credit for declining to entrench an anti-work
entitlement in exchange for popular business tax breaks... The discipline and norms of parents and neighbors who work are
crucial to helping children escape poverty, and this is one of the few cultural
choices government can influence through the welfare state.” – WSJ Editorial
Board. Opinion at...
https://www.wsj.com/articles/senate-republicans-block-tax-bill-child-tax-credit-ron-wyden-jason-smith-f6da0a93?mod=opinion_feat1_editorials_pos3
MEDICAID KEEPS GROWING (WSJ)
“The Centers for Medicare and Medicaid Services last week
approved North Carolina Democratic Gov. Roy Cooper’s plan to increase
federal Medicaid reimbursements for hospitals that agree to forgive medical
debt and discount future bills for low- and middle-income patients. Urging
other states to follow, Ms. Harris promised to continue “to relieve the burden
of medical debt.”
This could be an expensive proposition. Americans owe
more than $220 billion in medical debt, though perhaps Ms. Harris considers it
a pittance relative to the more than $800 billion in student debt the
Administration has written down... In sum, the Administration is
raiding Medicaid to increase welfare spending that Congress hasn’t authorized.
Taxpayers and Medicaid patients will pay the price.” – WSJ Editorial Board.
Opinion at...
https://www.wsj.com/articles/medicaid-expansion-biden-administration-kamala-harris-roy-cooper-north-carolina-42e8e209?mod=opinion_lead_pos4
ISM NON-MANUFACTURING (ISM)
“In July, the Services PMI® registered 51.4 percent,
2.6 percentage points higher than June’s figure of 48.8 percent. The reading in
July marked the fifth time the composite index has been in expansion territory
in 2024.”
https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/july/
My cmt: A number greater than 50% indicates expansion. No
recession here.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 3% to 5186.
-VIX rose about 65% to 38.57.
-The yield on the 10-year Treasury declined to 3.802%
(compared to this time, prior trading day).
MY TRADING POSITIONS:
XLK – Holding since the October 2022 lows.
XLK – added more 7/26. This reestablishes the position I
had before this recent weakness.
UWM – added 7/15.
QLD – added 7/24.
DWCPF - Dow Jones U.S. Completion Total Stock Market
(TSM) Index, a broad market index made up of stocks of U.S. companies not
included in the S&P 500 Index. – Added 7/29/2024
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
The Bull/Bear Spread count slipped to 20 Bear-signs and 7-Bull.
(The rest are neutral. It is normal to have a lot of neutral indicators since
many of those are top or bottom indicators that will signal only at extremes.)
The Bull/Bear, 50-Indicator spread (Bull Indicators minus
Bear Indicators) dropped from -7 to -13 (13 more Bear indicators than Bull
indicators). The 10-dMA continued to fall.
TODAY’S COMMENT:
In theory, this selloff is a news-driven pullback driven
by the weak economic news Friday. Jobs, Factory Orders and Durable Orders were
all down. To be fair, we had been following weak technicals for a while. There
were encouraging improvements in indicators until Thursday of last week, but
the dam broke Friday.
At Monday’s low (5119) the S&P 500 was down 9.7% and
only 2% above its 200-dMA. Both of those
numbers are about worst-case scenarios based on what the indicators were
suggesting over the course of several weeks.
At this point, we must be less confident that the
pullback will be limited to 10%. I don’t remember too many times when there was
a 3% down-day within a 10% decline. It happened during a 10% correction in
September 2020, but it probably isn’t the norm.
The close was somewhat higher than intraday numbers; at
the close we have an 8.5% drop from the top and the Index is 3.5% above its
200-dMA. However, the chart was not encouraging. There was some late-day buying,
but we would have preferred more.
90% of the volume was down-volume today, but not all of
the tests were made to meet the requirements for a “Lowry 90%, Down-Volume Day.
So this indicator is neutral. Even if it had met all the tests, 1 such day does
not mean that much. As stated by Lowry Research, “A single, isolated 90%
Downside Day does not, by itself, have any long-term trend implications, since they
often occur at the end of short-term corrections. But, because they show
that investors are in a mood to panic, even an isolated 90% Downside Day should
be viewed as an important warning that more could follow.”
Total volume was 40% higher than the monthly average and
it was higher than the previous low yesterday. This suggests more fear, so
today was probably not a bottom even though there were bottom signs.
There were Bottom Signals today, as Bollinger Bands, RSI
and Last Hour trading were oversold. The 7-day Rate of Change for VIX jumped to
93. As noted by Tom McClellan of McClellan Financial Publications, "...any
reading above around +20% is a pretty good sign of an oversold bottom for stock
prices, one that is worthy of a bounce...” The Panic Indicator flashed, but
this one can be a buy or sell signal; Sell at the top or Buy at the
Bottom. Since it appears that we are
closer to a bottom, I’ll call this signal bullish. Looking at history...
We could be in one of these ‘selling stampedes’ that tend
to last 17 – 25 sessions, with only 1.5-to three-day pauses/throwback rallies,
before they exhaust themselves on the downside. It’s too soon to tell if it is (we
are at day 14), but as Jeffrey Saut said, “Never on a Friday.” The reference
was that once the markets get into one of these weekly downside skeins, they
rarely bottom on a Friday. Nope, they typically give participants over the
weekend to brood about their losses and then they show up the next Monday in ‘sell
mode’ leading to Turning Tuesday.” As of now, it doesn’t look like tomorrow is “Turning
Tuesday.”
LONG-TERM INDICATOR: The Long Term NTSM indicator remained
SELL: VOLUME, VIX & PRICE are bearish; SENTIMENT is neutral.
(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 “Summary of 50” indicator.
BOTTOM LINE
It’s always possible that today was the bottom since this
selloff seems way over done, but I don’t think we’ve seen the bottom yet. Even if
this is not the bottom, I expect there will be a bounce higher Tuesday. As of
8pm, futures agree.
I am holding my trading positions, because I feel that it
is too late to sell.
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)
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 declined to SELL. (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 70% stocks, including stock mutual funds and ETFs. I’m
usually about 50% invested in stocks when markets are stretched; my current
stock position is above the norm. (75% is my max stock allocation when I am
strongly bullish.)
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, usually by using an S&P 500 ETF as I did
back in October 2022 and 2023.
