“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.
"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.
“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.
PRODUCER PRICE INDEX PPI (CNBC)
“The producer price index rose 0.7% for the month...On a
year-over-year basis, the gauge rose 8.3%, which is the biggest annual increase
since records have been kept going back to November 2010.” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:00 PM Friday. 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. One can see it is slightly off its peak, so perhaps we have
seen the worst of the Delta-variant. Unfortunately, I suspect we may see
another peak as Delta moves to other areas – hope I am wrong.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.8% to 4459.
-VIX rose about 11% to 20.95.
-The yield on the 10-year Treasury rose to 1.341%.
I took profits in Microsoft today. It has not been acting
well and had given back about 3% from its top. With the market acting up, I
thought I’d take a little off the table. I still made 7.5% in 2 months I held
MSFT so I can’t complain. I’ll buy back
the top Momentum Dow stock when we get over this rough patch in the market. Who
knows...it might still be Microsoft, but there were still bearish signs in the market today.
The S&P 500 chart had a bearish close today (as shown below),
with a big late day sell-off.
The Friday run-down of some important indicators flipped to the Bear side (12-bear and 5-bull) from last Friday. These indicators tend to be both long-term and short-term, so they are different than the 20 that I report on daily. Details follow:
BULL SIGNS
-The 10-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 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 27 August.
-Short-term new-high/new-low data is rising.
NEUTRAL
-Long-term new-high/new-low data is flat.
-There was a Follow-thru day on 27 Aug. This cancels any prior Distribution days, but
the signal has expired.
-Distribution Days.
There have been 2 in the last 25-days, not enough to send a signal.
-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.
-The Fosback High-Low Logic Index is neutral.
-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.
-27 Aug, the 52-week, New-high/new-low ratio improved by 0.7
standard deviations, somewhat bullish, but neutral.
-There have been 3 Statistically-Significant days in the
last 15-days. This can be a bull or bear signal. 3 is neutral.
-The S&P 500 is 9.8% 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 were 5 Hindenburg Omen signals 16-23 Aug. The McClellan Oscillator turned positive
afterward, so the Omens have been cancelled.
-7.7% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high 2 September. (There is no
bullish signal for this indicator.) This is above the average for all-time
highs and suggests that if we do have a pullback it is likely to be less than
10%.
-There have been 11 up-days over the last 20 days.
Neutral
-There have been 4 up-days over the last 10-days. Neutral
-Overbought/Oversold Index (Advance/Decline Ratio) is
neutral.
BEAR SIGNS
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50%. This is the 4th day in a row – very bearish.
-MACD of S&P 500 price made a bearish crossover, 9
September.
-McClellan Oscillator.
-The smoothed advancing volume on the NYSE is falling.
-My Money Trend indicator.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-Breadth on the NYSE compared to the S&P 500 index is
bearish.
-The Smart Money (late-day action) indicates the Pros are
selling. (This indicator is based on the Smart Money Indicator developed by Don
Hayes).
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500.
-The S&P 500 is under-performing the Utilities ETF
(XLU).
-43% of the 15-ETFs that I track have been up over the
last 10-days.
-VIX is rising sharply. This is one of my more reliable
indicators.
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 12 bear-signs and 5 bull-signs. Last week, there were 5 bear-signs and 14
bull-signs.
My “definition” of correction is when the 50-dMA of
advancing issues is less than 50% for 3 consecutive days. Today was the 4th
day in a row below 50%. This signal warned 17-26 August and we didn’t see a
correction then, but this is a follow-on to that weakness and suggests that we
may actually see a pullback now.
The daily sum of 20 Indicators improved from -10 to -5 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -15 to -12. (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
ensemble remained HOLD. VIX was bearish; Volume, Price & Sentiment
indicators are neutral.
Looks like pullback time is
here. The S&P 500 is only 0.8% above its 50-dMA. That’s where these dips have stopped
recently. With the FED’s QE still in play, corrections have been few and far
between.
I’m more bearish now. I think
there are enough worries to take the market below the 50-dMA. My guess would be
a 7% dip from the top or about 5% below today’s close.
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 improved to NEUTRAL 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.
My stock-allocation is now
about 45% invested in stocks; this is slightly below my “normal” fully invested
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.
