Payroll Report / Unemployment Rate ... Michigan Sentiment ... 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.
 
IS MODERATE ALCOHOL USE CAUSING CANCER?
I was intrigued by the recent Surgeon General assertion that warnings should be placed on alcoholic beverages because research shows even moderate alcohol use causes cancer.  That was followed by a WSJ opinion piece by Allysia Finley (WSJ Editorial Board) that stated “...a congressionally mandated review of the recent evidence on the health effects of moderate drinking, or up to one drink a day for women and two for men. Its more than 200 pages of findings run counter to Dr. Murthy’s 22-page report, though they got scant attention in the press. The academies found insufficient evidence to support a link between moderate drinking and oral, pharyngeal, esophageal, laryngeal and other cancers.” A response in the WSJ letters from a Professor at George Washington Univ to the editor noted “...While Surgeon General Vivek Murthy’s report on alcohol and cancer risks acknowledges nuances in alcohol-related cancer risks, the broader body of research unequivocally links even moderate alcohol consumption to increased risks of breast, mouth and throat cancers.” Talk about confusion. “What can a poor boy do?” I thought I’d check rates of Esophageal cancer vs. alcohol consumption. The results are mixed.
 
Belarus tops the world’s alcohol consumption rate at 14.4 liters per person per year. The U.S. is 25th in alcohol consumption at 8.7 liters per year. Belarus falls below the US in Esophageal cancer rates at 5.5 per 100,000 vs the U.S. rate of 6 per 100,000. So, while they drink 65% more alcohol their Esophageal cancer rate is about 20% lower. (In addition, cigarette smoking in Belarus is more prevalent than in the US, but that’s a different issue.)
 
On the other hand, France is near the top in alcohol consumption (11.8 liters per year per person – 2x the US rate). Their Esophageal cancer rate is the highest in the world at 11 per 100,000 nearly 2x the US rate. “What can a poor boy do?”
 
I don’t know. The real problem becomes:  how does one do an alcohol study on moderate drinking that controls for smoking, obesity, diet, exercise, etc.? “Adjustments” for these differences make the conclusion of studies on the subject suspect since the studies cited by the Surgeon General found only a 5% greater cancer rate due to moderate alcohol use vs. no alcohol use.
 
In conclusion, I’ll keep enjoying wine with dinner.
 
PAYROLL REPORT / UNEMPLOYMENT RATE (CNBC)
“Nonfarm payrolls surged by 256,000 for the month, up from 212,000 in November and above the 155,000 forecast... The unemployment rate edged down to 4.1%, one-tenth of a point below expectations.” Story at...
https://www.cnbc.com/2025/01/10/jobs-report-december-2024.html
 
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer sentiment was essentially unchanged in January, inching down less than one index point from December, well within the margin of error. Assessments of personal finances improved about 5%, while the economic outlook fell back 7% for the short run and 5% for the long run. January’s divergence in views of the present and the future reflects easing concerns over the current cost of living this month, but surging worries over the future path of inflation.” Report at... 
http://www.sca.isr.umich.edu/
 
MARKET REPORT / ANALYSIS AS OF 1PM FRIDAY
-Friday the S&P 500 fell about 1.5% to 5827.
-VIX rose about 10% to 19.54.
-The yield on the 10-year Treasury rose (compared to about this time, prior trading day) to 4.763%.
 
MY TRADING POSITIONS:
XLK – Holding since the October 2022 lows.  Added more 9/20.
 
SSO – added 12/20. (IRA acct.)
SPY – added 12/20. (IRA acct.)
QLD – added 12/20. (IRA acct.)
NVDA – added 1/6/2025
 
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
Today, of the 50-Indicators I track, 18 gave Bear-signs and 4 were Bullish. The rest are neutral. (It is normal to have a lot of neutral indicators since many of the indicators are top or bottom indicators that will signal only at extremes.)
 

The daily Bull/Bear, 50-Indicator spread (Bull Indicators minus Bear Indicators, red curve in the chart above) declined to -14 (14 more Bear indicators than Bull indicators).
 
TODAY’S COMMENT
Good news is bad news? The markets didn’t like the payroll report today – too many jobs were added. I agree with Josh Brown. On CNBC’s mid-day show he said, “When the market sells off because the economy is too good, it’s a buying opportunity.” Josh Brown is co-founder and CEO of Ritholtz Wealth Management and seems to have a pretty good take on the markets. Let’s look at the technicals; there were a few bright spots buried in today’s weak, down-day.
 
Friday was a statistically significant down-day. That just means that the price-volume move exceeded my statistical parameters. Statistics show that a statistically-significant, down-day is followed by an up-day about 60% of the time.  Bottoms almost always occur on or near Statistically-significant, down-days, but not all statistically-significant, down-days occur at bottoms. Bollinger Bands were very close to an oversold signal, but that was the only bottom signal in my system.
 
The 7-Day VIX ROC gave a buy signal two days ago. Tom McMillan has written previously, "...any reading above around +20% is a pretty good sign of an oversold bottom for stock prices, one that is worthy of a bounce...” Tuesday’s value for the 7-day rate of change for VIX was 21.
 
My Money Trend indicator is still moving higher – a buy signal.  
 
The10-dMA of the 50-day indicator spread is still rising so that’s a bullish sign too.
 
A week ago, at the test of the 19 December low, there was a big swing in the indicators that confirmed internal improvement we had noticed last Thursday. Those signs gave me confidence to suggest that we had seen an end to the weakness. So far, that has not worked out. It has been followed by more weakness. It is not unusual to see a “confirmed” low followed by more weakness, but the weakness usually does not last long.  Given the bullish signs noted above, I am hoping that this weakness is about to end.  For that to happen, we need to see indicators improve.  That did not happen today.   
 
The daily, bull-bear spread of -14 is Bearish. 
 
BOTTOM LINE
I am neutral, expecting this weakness to end very soon.  If not, I’ll have to consider taking a much more conservative market position.
 
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
 
FRIDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals declined to SELL. (My basket of Market Internals is a decent trend-following analysis that is most useful when it diverges from the Index.) 
 
 
 

...My current invested position is about 75% stocks, including stock mutual funds and ETFs. 50% invested in stocks is a normal position. (75% is my max stock allocation when I am confident that markets will continue higher; 30% in stocks is my Bear market position.)
                                             
I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. When I see bullish signs, 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.