“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.
It is economically absurd to believe more expensive
energy, free childcare, free paid leave, free education for two years, and
higher taxes won't increase inflation and slow growth.” – Mike “Mish” Shedlock.
FOMC MINUTES (Economic Times)
“Most participants judged that the Committee’s standard
of ‘substantial further progress’ toward the maximum-employment goal had not
yet been met,” minutes of the Federal Open Market Committee’s July 27-28
gathering released in Washington Wednesday said...Powell in his press
conference following the July meeting said “the labor market has a ways to go,”
a view expressed by several other officials since then.” Story at...
This article is probably more important than the minutes. Repeating from
yesterday:
FED EYES TAPERING IN A FEW MONTHS (WSJ)
“Federal Reserve officials are nearing agreement to begin
scaling back their easy money policies in about three months if the economic
recovery continues... this timetable...would enable them to raise
interest rates sooner than currently anticipated if the economy makes rapid
progress toward their goals.” Story at...
https://www.wsj.com/articles/fed-officials-weigh-ending-asset-purchases-by-mid-2022-11629106200
HOUSING STARTS / BUILDING PERMITS (Yahoo Finance /
Reuters)
“U.S. homebuilding fell more than expected in July, the
latest sign that surging construction costs and home prices continued to constrain
the housing market early in the third quarter...the report from the Commerce
Department on Wednesday showed a rebound in building permits last month, the
increase was led by the volatile multi-family home segment, which will do
little to ease an acute housing shortage... Housing starts dropped 7.0%...”
Story at...
https://finance.yahoo.com/news/u-housing-starts-fall-sharply-124325984.html
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 3.2 million barrels from the
previous week. At 435.5 million barrels, U.S. crude oil inventories are about
6% below the five year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30 PM Wednesday. 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.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell about 1.1% to 4400.
-VIX rose about 20% to 21.57.
-The yield on the 10-year Treasury slipped to 1.262%.
Today, we had the third Hindenburg Omen in a row. Clusters of Omens increase confidence in the
signal and suggest more strongly that there is a pullback coming or underway.
The last time we saw 3 in a row was about 2 weeks before the top of the 34%
Coronavirus correction. I do not expect
a drop that big now. A correction in the
7-10% range seems more likely. Of course, there’s no guarantee that we’re in a
correction at all. (I discussed the definition of the Hindenburg Omen in
Tuesday’s blog.)
We do note that the 50-dMA of stocks advancing on the
NYSE was only 48.8%. Simply stated, this means that more than half of the
issues on the NYSE have been down over the last 2-1/2 months. If we see another
day less than 50%, I’d say the correction is here.
The daily sum of 20 Indicators declined from -8 to -12 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations slipped from -37 to -40. (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 Long Term NTSM indicator remained
HOLD, but the VIX indicator gave a bear sign. VIX is one of my better
indicators and a negative VIX indication is not a good sign. Price, Volume
& Sentiment are neutral; VIX is bearish.
Looks like we’re headed for a
rough patch in the stock market. More bear signs would make me trim some stock
holdings.
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
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained BEARISH 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.
