Business Optimism ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
 

              Saw this on Facebook.
 
“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.
 
NFIB BUSINESS OPTIMISM (NFIB)
“The NFIB Small Business Optimism Index fell by 2.5 points in August to 91.2, erasing all of July’s gain. This is the 32nd consecutive month below the 50-year average of 98. The Uncertainty Index rose to 92, its highest level since October 2020. Inflation remains the top issue among small business owners, with 24% of owners reporting it as their top small business operating issue, down one point from July.” Report at...
https://www.nfib.com/surveys/small-business-economic-trends/
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.5% to 5496.
-VIX declined about 2% to 19.10. 
-The yield on the 10-year Treasury declined to 3.644% (compared to about this time, prior trading day).
 
MY TRADING POSITIONS:
XLK – Holding since the October 2022 lows.
XLK – reduced 9/9.
UWM – added 7/15.
QLD – added 7/24. Reduced 9/6.
 
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
The Bull/Bear Spread improved slightly but remained in a bear position at 17 Bear-signs and 5-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) improved slightly to -12 (12 more Bear indicators than Bull indicators). The 10-dMA continued down, a bearish sign.
 
TODAY’S COMMENT:
Tuesday there was a Hindenburg Omen signal. Investopedia says, “The Hindenburg Omen is a technical indicator that was designed to signal the increased probability of a stock market crash. It compares the percentage of new 52-week highs and new 52-week lows in stock prices to a predetermined reference percentage that is supposed to predict the increasing likelihood of a market crash... The Hindenburg Omen looks for a statistical deviation from the premise that under normal conditions, some stocks are either making new 52-week highs or new 52-week lows. It would be abnormal if both were occurring at the same time.” From Investopedia at...
https://www.investopedia.com/terms/h/hindenburgomen.asp
As we’ve noted before, the Omen sends a lot of false warnings.  
 
There were several Omens in mid-June about a month before the top of the 8.5% correction that bottomed on 5 August. Then, the Fosback Hi/Low Logic indicators were not confirming the signal.  This time, the short-term Fosback Hi/Low Logic indicator is also bearish. The Fosback indicator looks at the number of new-highs and new-lows in a somewhat similar style of analysis as the Hindenburg Omen.
 
One indicator improved today - the slope of a moving average of new-highs is now headed higher. Overall, indicators are quite bearish.
 
The 10-dMA of Breadth (% of stocks advancing on the NYSE) dropped again and remains below 50%, i.e., half of all stocks on the NYSE have been falling over the last 2 weeks. That’s not a healthy market, but it doesn’t mean we are headed for a crash. It does show internals are getting worse, not better, and that suggests more pain ahead.
 
Similar to Friday’s comments:
To answer the question of how far this pullback may go, we see the following:
-The S&P 500 is 0.2% below its 50-day moving average and 6.6% above its 200-dMA.
-It is 6% above the 5 August bottom of the recent 8.5% correction.
This suggests that the bottom of this pullback is likely to be no more than 6 to 7% below today’s close. This looks like a retest of the recent low and not much more.
 
BOTTOM LINE
I am bearish, but not overly so.  Indicators are bearish enough to suggest that this pullback is not over. I still expect a retest of the prior low of 5186.
 
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
 
TUESDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals remained 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 50% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks when markets are stretched. (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.