“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"If I was Darth Vader and I wanted to destroy the US
economy, I would do aggressive spending in the middle of an already hot
economy...This is the biggest bubble I've seen in my career." - Stanley
Druckenmiller, billionaire investor.
OMICRON NOT TO BLAME (Heritage Capital)
“...the pullback has little to do with Omicron and more
to do with the Fed. In fact, Omicron wasn’t even on my top 10 list. I thought
stocks could find a low by 4500 on the S&P 500 which was very close on
Thursday. Perhaps, the Fed meeting in 10 days will be the turning point. I
still feel very strongly that the low is coming for a powerful rally into
January.” – Paul Schatz, Presidengt Heritagae Capital. Commentary at...
https://investfortomorrow.com/blog/stocks-bounced-and-declined-what-now-omicron-not-to-blame/
WHATS REALLY DRIVING THE OMICRON SELLOFF (RIA)
“While the media is running around trying to pin
headlines on the market moves from the Fed to the Omicron variant, the
reality is that we are in the midst of mutual fund distribution season. As
Michael Lebowitz noted: ‘We believe the rotation is not a sudden change in
mindset but, likely the actions of mutual funds rebalancing their
portfolios. Frequently at year-end mutual funds sell the winners which
have become overweight positions and buy the losers which are below their
proper weights. The large returns this year in certain sectors are making
these actions more visible than normal.’ There is still some sloppiness likely
over the next week, but such should theoretically provide investors the entry
point for a “Santa Rally.” – Lance Roberts. Commentary at
https://realinvestmentadvice.com/omicron-selloff-is-it-over-yet/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 10:00 PM Monday. U.S. total case numbers are on the left axis; daily numbers
are on the right side of the graph in Red with the 10-dMA of daily numbers in
Green. I added the smoothed 10-dMA of new cases (in purple) to the chart.
Today’s big daily number of new cases is mostly due to
low reporting over the weekend. The
important point to note is that the moving averages have turned up – not a good
sign.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.2% to 4592.
-VIX fell about 11% to 27.25.
-The yield on the 10-year Treasury rose to 1.435%.
While many indicators are pointing down, it’s always a
good idea to remember that indicators mostly give us trend direction. They don’t foretell the future, i.e., the
trend may change tomorrow. The best
indicators identify trend changes by determining divergences that can help
locate pockets of bullish behavior that can be indicative of a future move in
the market as a whole. Those are fancy words to explain that often we don’t
know WTF is going on.
As I noted Friday, “We didn’t get a lower-low, so this
correction is likely not over. Breadth got worse, further reinforcing that
view.” But there were a couple of signs Friday that were hinting at a bottom.
Volume was slightly lower Friday when compared to the prior low, suggesting
lower selling pressure. We also noted that the index reversed around 3PM Friday
and closed higher than the lower quarter of Friday’s range. On the negative
side, breadth got worse and new-high/new-low spread didn’t improve much. This suggests that Friday's late-day action
was mostly in large caps. In
corrections, small caps usually lead the recovery so the failure of breadth to
improve is an argument against “correction over.” Even so, we can’t ignore
today’s action.
Apparently, most investors didn’t agree with my opinion
and we see new bull signs today in addition to the obvious bullish move in
price for all the indices. One troubling clue today was in Utilities. They were up 1.5% while the S&P 500 was
up 1.2%. If the correction was over, why weren’t they selling utilities? Do the
Pros know something I don’t? I am sure they do, but in this case the “what” is
not clear.
Smart Money (late-day action, presumably by the Pros) is
still headed down and that is bearish. Looking at the chart we see that the
Index closed exactly on the upper trend line of the current downturn, so from a
chart perspective, we wouldn’t conclude the correction is over, at least not
yet.
My Money Trend Indicator moved up and is bullish. Other
than that, I didn’t see any bull signs that jumped out to me.
Still, Mr. Market doesn’t read my blog and sometimes pays
little attention to my opinions. Given the move today, if we get another strong
move higher Tuesday, especially if up-volume is high (>80%), I’d say it’s
time to Buy. Otherwise, I plan to wait-and-see a little longer.
The daily sum of 20 Indicators improved from -13 to -10
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -124 to -122 (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator
ensemble remained SELL. VIX & Volume are bearish; Price & Sentiment are
Neutral. This indicator ensemble
doesn’t mean much now. I am looking at other indicators for a buy signal. The Long-Term Ensemble is good on the sell
side, but it can be slow to give buy signals.
I am bearish to neutral –
let’s see what happens tomorrow.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
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
TODAY’S RANKING OF THE DOW 30
STOCKS (Ranked Daily)
Here’s the revised DOW 30 and
its momentum analysis. 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)
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 usually right, but they are often late. They are most useful when they diverge from the
Index.
I’ll be a buyer when we can
see an end to the current weakness.
My stock-allocation in the
portfolio is now about 35% invested in stocks; this is well below my “normal”
fully invested stock-allocation of 50%.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees.
As a general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
