“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
HOUSING STARTS / BUILDING PERMITS (FoxBusiness)
“U.S.
homebuilding unexpectedly slowed in October as builders
continued to struggle with higher costs and supply shortages. Housing
starts fell 0.7% last month... Meanwhile, permits for future construction rose
4% to 1.65 million, exceeding the 1.638 million units that were anticipated.”
Story at...
https://www.foxbusiness.com/economy/housing-starts-building-permits-october-2021
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 2.1 million barrels from the
previous week. At 433.0 million barrels, U.S. crude oil inventories are about
7% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
TRADE “THE
OFF-THE-CHARTS BULL MARKET” – Excerpt (Real Investment Advice)
“...valuations are a reflection of investor psychology.
Currently, at 40x earnings (Shiller’s CAPE ratio), there is little argument
that investors are just about as bullish as they can get.
Looking at the chart, it indeed suggests that investors
should be selling everything immediately. However, given this is monthly data,
these turns can take much longer than expected. It is this “lag” that
leads investors in the short-term to believe that “valuations” no
longer matter. Such is a dangerous assumption and one that investors paid
dearly for in the past. Valuations do matter, and they matter a lot...
Historically, the environment we are living in currently has not worked out
well for investors. However, in the short term, the “irrationality”
will last long enough to convince you “this time is different.” – Lance Roberts. Commentary
at...
https://realinvestmentadvice.com/trade-the-off-the-charts-bull-market/
BIDEN ADMINISTRATION HOLDS THE LARGEST OIL AND GAS SALE
IN US HISTORY (Boston Globe)
“The Biden administration has pledged to make climate
change a top priority. But on Wednesday morning, it held the largest offshore
oil and gas lease sale in US history. Wait, what?...[Predictably]... Activists
say moving forward with the leasing calls into question the administration’s
commitment to climate action.” Story at...
Biden
administration holds largest oil and gas sale in US history (msn.com)
Gotta’ get those votes somewhere! This is a bit weird
though; Biden canceled all new leases on public lands and waters by Executive
Order shortly after he took office.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 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.
Over the last 3 days, new cases have exceeded 100,000.
That’s above the daily averages we have been watching and the curve looks like
it is just starting to trend higher...not a good sign. Hope it doesn’t last!
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 slipped about 0.3% to 4689.
-VIX rose about 5% to 17.11.
-The yield on the 10-year Treasury slipped to 1.592%.
I just noticed that yesterday (Tuesday), the S&P 500 closed
less than 1 pt. below a new all-time high. That raises the question, “What was
the percentage of new-52-week highs on Tuesday?
The answer is not good. Only 2.7% of issues on the NYSE made new 52-week
highs at the S&P 500 high. That is a worrisome sign that shows a lack of
Breadth. Further, today’s data shows that less than half of issues on the NYSE
have been up over the last 10-days and 10-day up-volume is below 50%, too. If
we do have a correction from here, it is likely to be larger than 10%, based on
the new-high data.
We might also be a little concerned that the chart made a
double-top on Tuesday with a failure to break higher. If that weren’t enough, there was a
Hindenburg Omen on the S&P 500 today.
The Hindenburg Omen is a stock market indicator named
after the famous crash of the Hindenburg dirigible in New Jersey in 1937. As
you might expect, it is supposed to forewarn of a stock market crash. To have a Hindenburg Omen warning the
following conditions must be met:
“-The daily number of new 52-week highs and 52-week lows
in a stock market
index are greater than a threshold amount (typically 2.2%).
-The 52-week highs cannot be more than two times the
52-week lows.
-The stock market index is still in an uptrend. A
10-week moving
average, or the 50-day rate of
change indicator, is used to indicate this.
-The McClellan
Oscillator (MCO), a measure of the shift in market sentiment,
is negative.”
Definition from Investopedia at...
https://www.investopedia.com/terms/h/hindenburgomen.asp
The Omen is more meaningful when there are a group of
them together. The last time there was a cluster of Omens the Index dropped
about 5%, so the indicator’s name may be a little overblown.
On the good-news side, the Index was due for a rest after
a remarkable run of consecutive new highs.
The S&P 500 also bounced down from its upper trendline last week so
some continued retreat would not be surprising. A drop in the 3-5% range would
be normal.
For now, I’ll keep an eye on indicators to see if there
are signs that this weakness might deteriorate into a bigger problem. We still
have the “calm-before-the-storm” indicator that suggests a 1-3% one-day drop
coming within the month. So, vigilance is important. If that happens at the bottom of the
trendline, I’d consider it a buying opportunity. For now, indicators continue
to fall.
The daily sum of 20 Indicators declined from -3 to -9 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from +13 to -1 (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 remained BUY. Price & VIX are bullish; Volume & Sentiment are
neutral. It’s always good to remember that the long-term indicator can be “Buy”
at a top. It is designed to signal good
conditions after a bottom. Now, it is
telling us conditions are good, but it doesn’t tell us when conditions are too
good.
Hard to see if those
conditions will remain good in the near future.
Looks like markets are in a
pullback. I expect it will be relatively
small, but at least one indicator is warning that may not be the case. That
should remind me: “Trade what I see, not what I think.”
I am not bearish yet, but it’s
hard to be overly bullish now...we’ll see.
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
** XLE has outgained XLY over
the last 2 months so I am still holding XLE rather than switching to XLY.
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
** CRM has outgained HD over
the last 2 months so I am still holding CRM rather than switching to HD.
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals declined to 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 50% invested in stocks; this is my “normal” fully
invested stock-allocation.
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.
