“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“People always ask me what is going on in the markets. It
is simple. Greatest Speculative Bubble of All Time in All Things. By two orders
of magnitude.” – Michael “Big Short” Burry.
“Inflation is not going to be transitory;
I’ve been pretty certain in my mind about three prior calls. This is the fourth
one.” - Mohamed El-Erian, Chief economic adviser at Allianz SE
PERSONAL INCOME / SPENDING (US News)
“Americans spent 1% more in June, as they took advantage
of flush savings and frequented restaurants, stores and attractions, the
Commerce Department reported on Friday. Personal income also was higher, up
0.1%, driven by an increase in wages as companies find it necessary to pay more
to keep or hire workers.” Story at...
PCE PRICES (Reuters)
“The personal consumption expenditures (PCE) price index,
excluding the volatile food and energy components, rose 0.4% in June after
advancing 0.5% in May. In the 12 months through June, the so-called core PCE
price index shot up 3.5%, the largest gain since December 1991.” [This is the FED's favorite inflation stat.] Story at...
https://www.reuters.com/article/us-usa-economy-spending-idUSKBN2F01TA
CHICAGO PMI (MarketWatch)
“A measure of business conditions in the Chicago region
showed the area’s economy surged again in July, with businesses trying to pump
out goods and services as fast as they can. The Chicago Business Barometer,
also known as the Chicago PMI, rose to 73.4 in July...” Story at...
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer sentiment edged upward at the end of July,
although it still posted a monthly decline of 5.0%. The largest monthly
declines remained concentrated in the outlook for the national economy and
complaints about high prices for homes, vehicles, and household durables. While
most consumers still expect inflation to be transitory, there is growing
evidence that an inflation storm is likely to develop on the not too distant
horizon.” Press release at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:00 PM Friday. US total case numbers are on the left axis; daily numbers
are on the right side of the graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.5% to 4395.
-VIX rose about 2% to 18.03.
-The yield on the 10-year Treasury slipped to 1.228%.
We may have seen some technical selling at the end of the
month as mangers “window dress” their portfolios. That’s my guess, but who
knows? Futures were down last night so we can’t blame today’s down-day on the poor
inflation numbers. It doesn’t really matter and it is somewhat pointless to try
and guess even though the financial press always has a reason for daily results in
the markets. The good news is that indicators improved.
Here’s Friday’s run-down of some important indicators.
These tend to be both long-term and short-term, so they are somewhat different
than the 20 that I report on daily.
BULL SIGNS
-The 10-dMA of issues advancing on the NYSE
(Breadth) is above 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA of the % of issues advancing on the
NYSE (Breadth) is above 50%.
-The smoothed advancing volume on the NYSE is rising.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-My Money Trend indicator.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 16 July.
-MACD of S&P 500 price made a bullish crossover, 26
July.
-Short-term new-high/new-low data is rising.
-The S&P 500 is out-performing the Utilities ETF
(XLU), and trending higher.
-61% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Distribution Days.
-Bollinger Bands
-RSI.
-Statistically, the S&P 500 gave a panic-signal, 18
June, but the signal has expired.
-Non-crash Sentiment indicator remains neutral, but it is
very bullish and that means the signal is leaning bearish.
-3.7% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made a new all-time-high today, 26 July. (There
is no bullish signal for this indicator.) This is well below average, but not
quite low enough to send a bear signal – something to watch.
-The Fosback High-Low Logic Index is neutral.
-There have been 13 up-days over the last 20 days.
Neutral
-There have been 7 up-days over the last 10-days.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to give a signal.
-VIX.
-Overbought/Oversold Index (Advance/Decline Ratio) is
neutral.
-29 July, the 52-week, New-high/new-low ratio improved by
0.4 standard deviations, somewhat bullish, but neutral.
-McClellan Oscillator is bullish.
-The S&P 500 is 11.7% above its 200-dMA (Bear
indicator is 12%.). This value was 15.9% above the 200-dMA when the 10%
correction occurred in Sep 2020.
-There have been 3 Statistically-Significant days in the
last 15-days. This can be a bull or bear signal. 3 is neutral.
BEAR SIGNS
-Breadth on the NYSE compared to the S&P 500 index is
bearish.
-Long-term new-high/new-low data is falling.
-Slope of the 40-dMA of New-highs is falling. This is one
of my favorite trend indicators.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500 - bearish.
-The Smart Money (late-day action) is headed down. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 5
bear-signs and 11 bull-signs. Last week, there were 12 bear-signs and 8
bull-signs.
Today’s Friday count looks a lot more bullish than last
Friday.
The daily sum of 20 Indicators improved from -3 to -1 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -64 to -55. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term and many are trend following.
The Short-term, market-internals ensemble indicator remained
POSITIVE/BULLISH.
The Long Term NTSM indicator
remained HOLD. Volume, VIX, Price & Sentiment are neutral.
I am bullish, but with
caution; I still think there is a correction coming. But, I am reminded that
the key is to trade what we see; not what we think. I see more bullish indications.
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
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained POSITIVE on the market.
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.
Using the Short-term indicator
in 2018 in SPY would have made a 5% gain instead of a 6% loss for buy-and-hold.
The methodology was Buy on a POSITIVE indication and Sell on a NEGATIVE
indication and stay out until the next POSITIVE indication. The back-test
included 13-buys and 13-sells, or a trade every 2-weeks on average.
My stock-allocation is about 50%
invested in stocks. I am not super bullish (or bearish) and I am watching the
markets closely.
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
retiree, 50% in the stock market is about fully invested for me – it is a
cautious and conservative number. If I feel very confident, I might go to 60%;
if a correction is deep enough, and I can call a bottom, 80% would not be out
of the question.
