“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
FED BEIGE BOOK (Federal Reserve)
“Economic activity grew at a modest to moderate rate,
according to the majority of Federal Reserve Districts. Several Districts
noted, however, that the pace of growth slowed this period, constrained by
supply chain disruptions, labor shortages, and uncertainty around the Delta
variant of COVID-19... Outlooks for near-term economic activity remained
positive, overall, but some Districts noted increased uncertainty and more
cautious optimism than in previous months.” Report at...
https://www.federalreserve.gov/monetarypolicy/beigebook202110.htm
EIA CRUDE OIL INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 0.4 million barrels from the
previous week. At 426.5 million barrels, U.S. crude oil inventories are about
6% below the five year average for this time of year.” Story at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
INFLATION POSES A REAL THREAT TO STOCKS (Real Investment
Advice)
“Persistent Inflation Poses a Real Threat to Stock Prices...
...The Fed is running policy as if the economy were in a
depression when it is booming. More inflation is probable, at least in the
short run, and we best appreciate how inflation can wreak havoc on stock
prices.
Given record profit margins and valuations, there appears
little upside, especially if inflation remains problematic. Throw stagflation
into the formula, and the outlook is bleak.
We urge you carefully consider the risks and rewards in
various inflation environments and trade accordingly. This time is
different!
https://realinvestmentadvice.com/persistent-inflation-poses-a-real-threat-to-stock-prices
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 4:30 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. I added the smoothed 10-dMA of new cases (in purple) to the
chart.
Almost 15% of the entire US population has had Covid.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.4% to 4536.
-VIX dropped about 1% to 15.50.
-The yield on the 10-year Treasury rose to 1.660%.
The S&P 500 came within a point or two of an all-time
high today. It wasn’t hard – the Index only dropped about 5% from its prior
all-time high on 2 September. Although the pullback wasn’t large, it was about
average length for a real correction. Now, we have screaming bullishness;
however, there are a few bear signs cropping up.
Bear signs:
-Overbought/oversold ratio is “overbought”.
-Bollinger Bands are within a whisker of “overbought,”
but without confirmation from RSI I usualy don’t pay attention to this
indicator anyway. RSI is high but not
overbought yet.
-Utilities (XLU-ETF) have been outperforming the S&P
500 index recently and on a longer term measure, the trend is toward the bear
side. If this keeps up it would be quite bearsish.
Today marks 6 days in a row that the S&P 500 finished
in positive territory! On longer terms,
the numbers are not particularly bearish – 12-days have been up over the last
20-days; and 7-days have been up over the last 10-days. Will the markets go up
forever? Doubtful. As I have said for several days, I expect a down-day
tomorrow.
The daily sum of 20 Indicators improved from +6 to +9 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +23 to +37 (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 (but it was almost a buy). Volume is bullish; Price, VIX
and & Sentiment indicators are neutral. Surprisingly, sentiment is nearly a
buy since Rydex traders have gotten bearish. I’d hate to be betting against
this market. I think they are counting
up-days betting that the market can’t go up forever. Sooner or later they’ll be
right.
I remain bullish.
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 BULLISH 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 in the
portfolio is now about 65% invested in stocks; this is above my “normal” fully
invested stock-allocation of 50% stocks. Indicators are very bullish, so I am holding
a short-term position in additional Index Funds to boost returns.
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.
