IHS MARKIT COMPOSITE PMI (Markit Economics)
“US private sector firms signaled a sharp upturn in
business activity during November, despite the rate of expansion slowing from
October. Softer overall growth was largely led by the service sector, as
manufacturers posted a slightly stronger increase in production. Nevertheless,
pressure on capacity remained stark as labour and material shortages weighed on
the private sector...the rate of input price inflation reached a new series
high midway through the final quarter...The pace of selling price inflation
matched October’s series record high, as firms sought to pass on greater costs
to their customers.” News release at...
https://www.markiteconomics.com/Public/Home/PressRelease/c4f8600b63124921b109fba93bf6d523
FINANCIAL STABILITY REPORT (Federal Reserve)
“...Asset prices remain vulnerable to significant
declines should investor risk sentiment deteriorate, progress on containing the
virus disappoint, or the economic recovery stall...Since the May 2021
Financial Stability Report, equity prices rose further. While this increase is
due, in part, to improved earnings expectations, the ratio of prices to
forecasts of corporate earnings stands at the upper end of its historical
distribution.” Report at...
https://www.federalreserve.gov/publications/files/financial-stability-report-20211108.pdf
My cmt: Looks like they are saying equity valuations are
experienceing “irrational exhuberence” a term that Fed Chair Allen Greenspan
used a couple of years before the dot.com crash of 2001.
JUDGE SANCTIONS TRUMP LAWYERS (Washington Post)
“A federal judge has ordered two Colorado lawyers [Gary
D. Fielder and Ernest John Walker] who filed a lawsuit late last year
challenging the 2020 election results to pay nearly $187,000 to defray the
legal fees of groups they sued, arguing that the hefty penalty was proper to
deter others from using frivolous suits to undermine the democratic system. “As
officers of the Court, these attorneys have a higher duty and calling that
requires meaningful investigation before prematurely repeating in court
pleadings unverified and uninvestigated defamatory rumors that strike at the
heart of our democratic system...” wrote Magistrate Judge N. Reid Neureiter.”
Story at...
BEST ARGUMENT THAT 2020 ELECTION WASN’T RIGGED
“If Democrats rigged the 2020 election employing the
nefarious tactics alleged by President Trump, why didn’t Democrats apply the
same dishonest devices to win more of the 435 House and 35 Senate races...Had
Democrats possessed the power to rig elections in 2020, they surely would have
used it to secure sufficient seats to avoid the congressional deadlock that
plagues the American people today.” - Frank Richter, WSJ Opinion Page, 30
October.
My cmt: Thank-you, Frank. That’s the best common-sense
argument I have heard! BTW: The WSJ printed my Letter on the same day, top of
the page. Read it here...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 PM Tuesday. 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.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.2% to 4691.
-VIX rose about 1% to 19.38.
-The yield on the 10-year Treasury rose to 1.669%.
Holiday trading is usually bullish and the S&P 500
did manage to close higher even though the internals weren’t entirely supportive.
55% of the volume was up – that’s good; but only 47% of issues on the NYSE were
up and there were only 63 new-highs vs. 177 new-lows. It is not good to see
new-lows outpacing new-highs.
The 100-dMA of stocks advancing on the NYSE dropped below
50% today – more bearish news.
The Hindenburg Omens (4 in the last 5 sessions) are still
in effect while my Calm-Before-the-Storm indicator is still predicting a one
day drop of 1 to 3% within the next several weeks. That will probably signal
the end of this rough patch and may be a buying opportunity.
There is 1 topping indicator issuing a warning: Breadth
(issues advancing on the NYSE) vs. the S&P 500 shows bearish divergence.
The daily sum of 20 Indicators improved from -12 to -9 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from -44 to -54 (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 improved to BUY. VIX & Price are bullish; Volume & Sentiment
are neutral...But I am suspicious that the BUY signal is just a moving average
anomaly in the VIX number – the days being dropped in the calculation were
worse than today, but that doesn’t mean today’s value for VIX is good news. VIX
is rising and that’s generally bearish.
Still looks like markets are
in a pullback. I think it should be relatively small, but at least one
indicator is warning that may not be the case. If investors start worrying
about inflation and/or new Covid data, markets could get rattled. (Remember:
Trade what you see (indicators), not what you think.)
I am bearish in the short-term
based on Friday’s indicator run-down. In the long-term, it seems unlikely that
a major crash is coming soon, but it is not impossible. (Trading will be half-day
Friday, and I’ll post the Friday indicator run-down as usual.)
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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained SELL.
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 did take profits in the
Energy ETF (XLE) and Salesforce (CRM) as I indicated previously. This has temporarily dropped my stock
allocation. I’ll be a buyer as soon as
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 my “normal” fully
invested stock-allocation and is probably overly conservative.
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.
