“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
CHICAGO PMI (Advisor Perspectives)
“The Chicago Business BarometerTM, produced with MNI,
fell to 61.8 in November, the lowest reading since February, driven by a
slow-down in new orders.” Commentary at...
My cmt: Business is still expanding; it’s just at a slower
rate.
CONSUMER CONFIDENCE (Conference Board)
“The Conference Board Consumer Confidence Index® decreased
in November, following an increase in October. The Index now stands at 109.5
(1985=100), down from 111.6 in October... “Consumer confidence moderated in
November, following a gain in October,” said Lynn Franco, Senior Director
of Economic Indicators at The Conference Board...the proportion
of consumers planning to purchase homes, automobiles, and major appliances over
the next six months decreased. The Conference Board expects this to be a good
holiday season for retailers and confidence levels suggest the economic
expansion will continue into early 2022. However, both confidence and spending will
likely face headwinds from rising prices and a potential resurgence of COVID-19
in the coming months.” Report at...
https://www.conference-board.org/data/consumerconfidence.cfm
PATHWAY TO RESOLVE DEBT CEILING (NBC news)
“Democratic Sen. Joe Manchin of West Virginia on Monday
suggested there was a path forward to vote on the debt ceiling and avoid what would be the nation's first ever default...The clock is ticking on raising or
suspending the federal debt limit. The Treasury Department has said that the
government might not be able to meet its financial obligations after Dec. 15.”
Story at...
Maybe Manchin should run for President. He seems to be one of the few up there who has
a brain.
COULD THE FED TRIGGER THE NEXT FINANCIAL CRISIS? (Real
Investment Advice)
“The problem, as shown below, is that throughout history,
when the Fed begins to hike interest rates someone inevitability pushes
the “big red button.”
Commentary at...
https://realinvestmentadvice.com/could-the-fed-trigger-the-next-financial-crisis/
FED Chair Powell has stated that the Omicron virus poses
a threat to the economy so one would think that the Fed will be on hold for
longer than previously thought. But that’s not the case.
Inflation is high and the FED dropped the word “transitory”
in their statement regarding inflation. Fed Chair Powell discussed the possibility
of speeding up tapering (reducing Bond Buying) sooner. His statements impacted
markets today. The FED has managed to blow another massive bubble in equities
by keeping rates too low, too long so they are between a rock and a hard place.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 PM Tuesday. 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.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 fell about 1.9% to 4567.
-VIX jumped about 18% to 27.19.
-The yield on the 10-year Treasury dropped to 1.450%.
While the expectation of most investors is that the
markets will experience a Santa Claus rally from now into the holidays, it is
not a guarantee. - just look at 2018.
The S&P 500 topped on 20 September and didn’t bottom until Christmas
eve, 24 December. Now, the most recent top was on 18 November. A decline into
the Holiday would obviously be possible.
Today, the S&P 500 re-tested its recent low on
Friday. It did so on much higher, panic-volume,
indicating increased selling-pressure and that suggests that this decline is
not over. Down volume was 89.6% of the total volume and that almost meets the
90% down-volume, bearish sign. If we say “close enough” and count it as a
bearish 90% down-day, it would be a very bearish sign, because today would be
the second of these days in this decline, Friday and today. This is a rare bearish
indicator and should be taken seriously.
I used “panic” to describe the volume and that seems
appropriate. Based on the move in
Price-volume, my Panic Indicator flashed again today. As previously noted, the
Panic Indicator can be bullish, because panics happen at bottoms, or it can be
bearish as fear sweeps into the market.
Now, it is probably bearish, because the charts do not show the S&P
500 to be at its lower trend line. I looked back to see when was the last time
there were 2 Panic Indicator warnings that were only a day or so apart. The
last time it happened was in February of 2020 near the start of the Corona
Virus, bear-market; the first Panic Indicator was 3 days after the top. (This
time it was 5 days after the top.) That correction was 34% top to bottom.
The S&P 500 closed 0.7% above its 50-dMA and the
Index should test that level (at least) before this decline ends. The index is
only down 2.9% below its recent all-time high, so it is not much of a decline,
so far.
Not all indicators were
bearish. Bollinger Bands are oversold. I use this indicator with RSI. RSI is not yet
oversold, so we don’t have much of a bull sign. There are no other Bottom
Indicators that are bullish.
Today 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. This pattern of back and forth statistically-significant days is a
bearish sign that is common at tops. Investors
can’t seem to agree: sell or buy-the-dip? Given our indicators, I think selling
is the way to go.
The daily sum of 20 Indicators slipped from -14 to -16 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from -85 to -98 (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator
ensemble declined to SELL. Price, VIX & Volume are bearish. Sentiment is Neutral. (Sentiment is 96% bulls on a 5-day basis. Sentiment is very high and is a bearish sign,
even if we don’t have an “official” bearish indication for the Sentiment
indicator.)
Not all indicators were
bearish. Bollinger Bands are oversold. I use this indicator with RSI. RSI is not yet
oversold, so we don’t have much of a bull sign. There are no other Bottom
Indicators that are bullish.
Markets are clearly in
pullback. I’ll be working to identify a buying point. The average correction lasts from 1 to 2
months for corrections less than 10% and more than 10% respectively. I think
this pullback is inflation/FED related rather than Omicron-Covid, so I don’t
expect a quick resolution.
Breadth was not great at the top,
but not bad enough to send a clear signal. I am left with a guess that the
pullback will be in the 10% range. If inflation
and the Fed create enough fear, this pullback could get a whole lot worse.
If you want to take some
profits, sell higher PE stocks.
I am bearish.
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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained SELL.
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 35% invested in stocks; this is well my “normal” fully invested stock-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.
