“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“The steep August falloff in consumer sentiment ended in
early September, but the small gain still meant that consumers expected the
least favorable economic prospects in more than a decade... Some observers
anticipated that the early August plunge in confidence would quickly disappear
since it was driven by emotions. Emotions have long been known to speed
responses, the so-called fight or flight response, which was the adaptive
function they performed in early August. Many other sources of economic data have
since shifted in the same direction, and point toward slower growth in consumer
expenditures and purchases of housing to the end of 2021.” Survey at...
STRATEGIST SAYS TAKE PROFITS (CNBC)
“Financial markets appear vulnerable to what could be an
extreme move in either direction, according to Paul Gambles, co-founder of
investment advisory firm MBMG Group. As a result, Gambles said investors should
consider sitting on the sidelines and build up their cash positions
significantly.” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 7:30 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 off its peak, so perhaps we have seen the worst of
the Delta-variant.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped about 0.9% to 4433.
-VIX rose about 11% to 20.81.
-The yield on the 10-year Treasury rose to 1.371%.
Today, the S&P 500 closed 0.1% below its 50-dMA of
4436. That’s probably not enough to
generate panic, but there is a lot of scrutiny at this level. Further declines are likely to be met with
increased selling. Friday was a statistically significant down-day. That just means
that the price-volume move exceeded my statistical parameters. Statistics show
that a statistically-significant, down-day is followed by an up-day about 60%
of the time. Statistically-significant, down-days
are usually near bottoms, but statistically-significant, down-days can happen
anytime so they can’t be used alone for bottom calls. Still, it would not be a
surprise to see this small pullback end at the 50-dMA, and I do expect a bounce
Monday.
Let’s check the indicators.
The Friday run-down of some important indicators turned
more bearish (14-bear and 2-bull). 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 100-dMA of the % of issues advancing on the
NYSE (Breadth) is above 50%.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 27 August.
NEUTRAL
-The size of up-moves has been larger than the size of down-moves over the last month, but not enough to send a signal.
-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 1 in the last 25-days, not enough to send a signal.
-Bollinger Bands
-RSI.
-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.
-27 Aug, the 52-week, New-high/new-low ratio improved by 0.7
standard deviations, somewhat bullish, but neutral.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-VIX is rising but not fast enough to send a signal. This
is one of my more reliable indicators.
-The S&P 500 is 8.4% 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 10 up-days over the last 20 days.
Neutral
-There have been 2 up-days over the last 10-days - close
to Bullish, but still Neutral
-Overbought/Oversold Index (Advance/Decline Ratio) is
neutral.
-The Smart Money (late-day action) indicates the Pros are
undecided. (This indicator is based on the Smart Money Indicator developed by
Don Hayes).
BEAR SIGNS
-
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is below 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50%. This is the 9th day in a row – a number more than 3 is
very bearish.
-There have been 5 Statistically-Significant days in the
last 15-days. This can be a bull or bear signal. Looks like bear this time
since we are near the top.
-MACD of S&P 500 price made a bearish crossover, 9
September.
-McClellan Oscillator.
-The smoothed advancing volume on the NYSE is falling.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-My Money Trend indicator.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500.
-Short-term new-high/new-low data is falling sharply.
-The S&P 500 is under-performing the Utilities ETF
(XLU).
-Only 32% of the 15-ETFs that I track have been up over
the last 10-days.
-The 5-10-20 Timer System is SELL; the 5-dEMA and
10-dEMA are both below the 20-dEMA.
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 14 bear-signs and 2 bull-signs. Last week, there were 12 bear-signs and
5 bull-signs.
This week’s reading is solidly bearish. Now we can only
watch and see what Mr. Market does about the 50-dMA.
The daily sum of 20 Indicators declined from -8 to -9 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from -55 to -68. (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.
I am watching the long-term Indicator Ensemble and market action next week to guide any further reductions in portfolio stock holdings.
The Long Term
NTSM indicator ensemble remained HOLD. Volume is bearish; VIX, Price &
Sentiment indicators are neutral.
I’m bearish. The Friday Indicator
run-down was bearish enough to be very concerning. Now, it’s all about the
50-dMA.
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 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.
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.
