Chicago PMI … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“If I run and if I win, we will treat those people from January 6 fairly. We will treat them fairly. And if it requires pardons, we will give them pardons because they are being treated so unfairly.” – Donald Trump.  My cmt: “Pardons for those who attempted to alter the election outcome through intimidation? I voted for Trump, but that SOB belongs in prison.

 

“I don’t want to send any signals that it was OK to defile the Capitol. I want to deter what people did on January 6, and those who did it, I hope they go to jail and get the book thrown at them because they deserve it.” – Lindsey Graham, Republican Senator from SC.

 

CHICAGO PMI (ShareCast)

“The MNI Chicago business barometer rose to 65.2 from a revised 64.3 in December, coming in ahead of expectations for a reading 61.7.” Story at...

https://www.sharecast.com/news/international-economic/chicago-pmi-beats-expectations-in-january--9125965.html

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 7:00 PM ET Monday. 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.

 

Remember Sweden? They didn’t lock-down and were convinced that herd-immunity would be the best solution to the Coronavirus, Covid 19. Their death rate is 1.5/100,000.  The US death rate is 70% higher at 2.6/100,000. I suspect they are a healthier people without the obesity rate that we see in the US. Still, their strategy has not proved to be the disaster that was predicted by the pundits and the media.

If we focus on the box in the above chart we can see (below) that the 10-dMA of new-cases and the smoothed 10-day has peaked.

MARKET REPORT / ANALYSIS

-Monday the S&P 500 jumped about 1.9% to 4516.

-VIX dipped about 10% to 27.66. (That’s a 19% drop in 2 days.)

-The yield on the 10-year Treasury rose to 1.790%.  

 

Given that most corrections retest the prior lows, I’ll keep the pullback stats for a while.

Pullback Data:

Days since top: 19 (Avg= 30 days for corrections <10%; 60 days for larger, non-crash pullbacks)

Drop from Top: Now 5.9%; Max intraday: 12% (Avg.= 13% for non-crash pullbacks)

The S&P 500 is 1.8% above its 200-dMA.

The slope of the 200-dMA is still up.

 

I think the bottom was Thursday.  My signal to buy was Tuesday, 27 January when we saw sharply improved internals on lower-volume at the lower-low.  After that New-lows jumped higher worrying investors.  That improved this morning and the close was much better. There was a 3.5 std-deviation improvement in new-high/new-low data and that is a signal that the correction is over, or at least that if it retests the low, it is not likely to fall much below the previous low. Before QE, there would be a high probability of a retest of the Friday low of 4326. Now, it isn’t clear.

 

Today’s big move was a Follow-thru day. It is defined as follows:

“From the beginning of any attempted market rally during a definite downtrend, a 'follow-through' day is identified when a major index closes significantly higher, over 1% for the day, on a strong increase in volume from the day before.”

A follow-thru day cancels the bearish Distribution Days and confirms a new up-trend.

 

Today was a statistically significant up-day. That just means that the price-volume move exceeded my statistical parameters. Statistics show that a statistically-significant, up-day is followed by a down-day about 60% of the time.  This is the 5^th statistically significant day in the last 3-weeks. It’s now a bullish sign overall, though tomorrow could be a day for some profit taking.

 

The daily sum of 20 Indicators improved from -3 to +6 today (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations improved from -61 to -51 (The trend direction is more important than the actual number for the 10-day value.) 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 HOLD. Volume is bearish; Price is bullish; VIX & Sentiment are Neutral.

 

Internals improved, today. Along with the successful-test last week, this suggested the pullback was over so I bought more stocks. The market action, up almost all day with a strong positive close, suggests a lot of investors agreed with me.  

 

POSITIONS ADDED:

Last week: AAPL; XLE;

Monday: QLD; SPY

 

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

MONDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved to HOLD.

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. 

 

Today, I increased my stock-allocation in the portfolio to about 65% invested in stocks. This is above my “normal” fully invested stock-allocation of 50%. I will hold this trading-position for a while, but it will not be a long-term hold.

 

I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. If I can see a definitive bottom, I’ll add a lot more stocks to the portfolio using an S&P 500 ETF.

 

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.

Buying Stocks

I am adding to stock holdings, mostly thru an S&P 500 ETF. I’ll have a 65% invested position by the end of the day. Market internals look good.  New-highs/new-lows are improving. I am basing the move on the buy signal I got last week.

 

Personal Income ... Personal Spending ... PCE Prices ... Michigan Sentiment ... Risks for a Bear Market … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

PERSONAL INCOME / SPENDING (Nasdaq.com/Rtt news)

“The Commerce Department said personal income rose by 0.3 percent in December after climbing by an upwardly revised 0.5 percent in November... The report also showed personal spending fell by 0.6 percent in December after rising by 0.4 percent in November.” Story at...

https://www.nasdaq.com/articles/u.s.-personal-income-rises-less-than-expected-personal-spending-slumps

 

PCE PRICES (CNBC)

“A gauge the Federal Reserve prefers to measure inflation rose 4.9% from a year ago, the biggest gain going back to September 1983, the Commerce Department reported Friday.” Story at...

https://www.cnbc.com/2022/01/28/key-fed-inflation-gauge-rises-4point9percent-from-a-year-ago-fastest-gain-since-1983.html

 

MICHIGAN SENTIMENT – FINAL (Univ of Michigan)

“Consumer sentiment fell throughout January, posting a cumulative loss of 4.8%, sinking to its lowest level since November 2011, according to the University of Michigan Surveys of Consumers. The Delta and Omicron variants were largely responsible, but other factors, some of which were initially triggered by COVID-19, have become independent forces shaping sentiment, said U-M economist Richard Curtin, director of the surveys... Overall confidence in government economic policies is at its lowest level since 2014, and the major geopolitical risks may add to the pandemic active confrontations with other countries. Although their primary concern is rising inflation and falling real incomes, consumers may misinterpret the Fed’s policy moves to slow the economy as part of the problem rather than part of the solution, Curtin said.” Report at...

https://news.umich.edu/consumer-sentiment-sinks-to-decade-low/

 

TWO KEY RISKS FOR BEAR MARKETS ARE UNFOLDING (CNBC)

“Has the risk of a full-blown bear market risen on Wall Street?... Many years ago, legendary investor Stanley Druckenmiller told me that his historical analysis suggested that there are two triggers for meaningful bear markets in stocks: rising interest rates and the onset of war...Now, we seem to be staring down the barrel of both as the Federal Reserve has now acknowledged that it plans rate hikes throughout this year and a reduction in its holdings of Treasury bonds. Meanwhile, saber-rattling is taking place from the Kremlin to Kyiv and from Tiananmen to Taiwan.” – Ron Insana, CNBC Contributor and Senior advisor at Schroders. Commentary at...

https://www.cnbc.com/2022/01/27/ron-insana-two-key-risks-for-bear-markets-are-unfolding.html

 

CARNAGE (Northman trader)

“We are very oversold and there is plenty of bounce motivation to be had in the days and weeks to come, but be absolutely clear: There is not only tremendous carnage that has taken place, there is massive technical damage inflicted on charts with lots of trapped supply above all of which will be resistance on the way up and as long as indices can’t get above their broken moving averages risk remains lower.

I’ve long contended the Fed overdid it by insisting on buying trillions of assets while fiscal stimulus was flowing through the system already. This excessive inflow of liquidity caused asset prices to melt up into a historic bubble and now investors and traders who chased the liquidity party have paid the price. Not only with massive losses but now with inflation to boot.” Commentary at... 

https://northmantrader.com/2022/01/25/carnage-4/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 6:30 PM ET 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.

If we focus on the box in the above chart we can see (below) that the 10-dMA of new-cases and the smoothed 10-day has peaked, but it is not falling very quickly.

MARKET REPORT / ANALYSIS

-Friday the S&P 500 jumped about 2.4% to 4432.

-VIX dipped about 9% to 27.66.

-The yield on the 10-year Treasury dipped to 1.771%.  

 

Pullback Data:

Days since top: 18 (Avg= 30 days for corrections <10%; 60 days for larger, non-crash pullbacks)

Drop from Top: Now 7.6%; Max intraday: 12% (Avg.= 13% for non-crash pullbacks)

The S&P 500 is 1.6% below its 200-dMA.

The slope of the 200-dMA is still upward. If it turns down, it could generate some more selling.

 

The Friday run-down of some important indicators remained very bearish (19-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

-RSI is oversold.

-Overbought/Oversold Index (Advance/Decline Ratio) is oversold.

 

NEUTRAL

-Bollinger Bands.

-There have been 4 Statistically-Significant days (big moves in price-volume) in the last 15-days, including today. This can be a bull or bear. Now it’s neutral. Today’s move suggests a down day Monday, but markets may decide to move up for awhile so I wouldn’t trade this Monday.

-25 January, the 52-week, New-high/new-low ratio improved by 6 standard deviations.

-The Smart Money (late-day action) is mixed. (This indicator is based on the Smart Money Indicator developed by Don Hayes).

-VIX is falling, but not fast enough to send a signal.

-The S&P 500 is 1.6% below its 200-dMA (Bear indicator is +12%.). This value was 15.9% above the 200-dMA when the 10% correction occurred in Sep 2020. (Bigger bottoms are formed when the Index is at, or below, the 200-dMA.)

-There was a Hindenburg Omen signal on 10 January.  It has been cancelled because the McClellan Oscillator turned positive.

-The size of up-moves has been smaller than the size of down-moves over the last month, but not enough to send a signal. (This ones has been bearish for several days, but it improved to Neutral.

-Non-crash Sentiment indicator is bullish (93%-bulls on a 5-day basis), but not enough to give a sell signal. (Too bullish is bearish.)

-The S&P 500 Index is OK when compared to the issues advancing on the NYSE (Breadth).

-The NYSE almost had a 90% down volume day on 21 Jan.  That would be bearish, particularly if we have another 90% down-day in this pullback.

-The Fosback High-Low Logic Index is neutral, but has moved toward bear territory.

-There have been 6 up-days over the last 20 sessions – This would be bullish, but this indicator works with Sentiment and sentiment is not giving a bear signal. Now it’s Neutral.

-There have been 3 up-days over the last 10 sessions – Leaning bullish, but still Neutral.

-The Calm-before-the-Storm/Panic Indicator.

 

BEAR SIGNS

-Cyclical Industrials (XLI-ETF) are under-performing the S&P 500 in the short-term.

-The smoothed advancing volume on the NYSE is falling.

-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%.

-The 100-dMA % of issues advancing on the NYSE (Breadth) is below 50%

-The 50-dMA % of issues advancing on the NYSE (Breadth) has been below 50% for 34 consecutive days. (3 days in a row is my bear signal)

-My Money Trend indicator is falling.

-The S&P 500 has had 6 Distribution Days in the last 25-days.

-McClellan Oscillator.

-Slope of the 40-dMA of New-highs is down. This is one of my favorite trend indicators.

-MACD of the percentage of issues advancing on the NYSE (breadth) made a bearish crossover 5 January.

-Buying Pressure minus Selling Pressure is trending sharply down.

-MACD of S&P 500 price made a bearish crossover, 6 January.

-Short-term new-high/new-low data is falling.

-Long-term new-high/new-low data is falling.

-2.8% of all issues traded on the NYSE made new, 52-week highs when the S&P 500 made a new all-time-high, 3 January. (There is no bullish signal for this indicator.) This indicates that the advance is too narrow and a correction from here is likely to be >10%. Looks like this indicator was correct.

-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA are both BELOW the 20-dEMA.

-The S&P 500 is under-performing the Utilities ETF (XLU) over the last 40 sessions. It’s improving, but still has not gotten above its downward trend line.

-Only 32% of the 15-ETFs that I track have been up over the last 10-days.

 

On Friday, 21 February, 2 days after the top before the Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 19 bear-signs and 2 bull-signs. Last week, there were 20 bear-signs and 4 bull-signs.

 

The daily sum of 20 Indicators improved from -6 to -3 today (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -60 to -61 (The trend direction is more important than the actual number for the 10-day value.) 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 improved to HOLD. Volume is bearish; Price, VIX & Sentiment are Neutral.

 

I thought the low was Tuesday, 25 Jan. and I haven’t changed my mind that the low is in. Still, I’d like to see some further confirmation.  We saw an oversold bounce today, but New-High/New-Low data is going the wrong way. On Tuesday, new-lows improved from 792 to 159 and contributed to my buy signal. Since Tuesday, new-lows have risen to 542 today.  

 

Bottom line: I am going to wait until I get some more bullish data before I increase stock holdings significantly.  Friday’s big move higher could just be typical bounce in a correction.

 

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 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. 

 

Yesterday, I decreased my stock-allocation in the portfolio a little, but it remains about 45% invested in stocks. This is close to my “normal” fully invested stock-allocation of 50%. I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. If I can see a definitive bottom, I’ll add a lot more stocks to the portfolio using an S&P 500 ETF.

 

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.

GDP ... Durable Orders ... Jobless Claims … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

GDP (Yahoo Finance)

“U.S. gross domestic product (GDP) ramped up in the final months of 2021, with still-solid consumer spending helping stoke growth and offset early negative impacts from the Omicron variant's spread...GDP quarter-over-quarter, annualized: 6.9% vs. 5.5% expected, 2.3% in Q3...” Story at...

https://finance.yahoo.com/news/q4-gdp-us-economic-activity-recovery-192945002.html

 

DURABLE ORDERS (Bloomberg)

“Orders placed with U.S. factories for durable goods fell in December for the first time in three months, pointing to a pause in capital investment at the close of the fourth quarter. Bookings for all durable goods -- or items meant to last at least three years -- dropped 0.9% from November, reflecting a drop in orders for commercial aircraft and communications equipment.” Story at...

https://www.bloomberg.com/news/articles/2022-01-27/orders-for-u-s-durable-goods-post-first-decline-in-three-months

 

JOBLESS CLAIMS (YahooFinance)

“First-time unemployment filings ticked lower for the first time in four weeks after notching a three-month high in the previous reading, suggesting some of the Omicron-related disruptions that have recently weighed on the labor market's recovery may be easing... Initial jobless claims, week ended Jan. 22: 260,000 vs. 265,000 expected...”  Story at

https://finance.yahoo.com/news/weekly-unemployment-claims-week-ended-jan-22-2022-215506502.html

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 7:30 PM ET Thursday. 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.

If we focus on the box in the above chart we can see (below) that the 10-dMA of new-cases and the smoothed 10-day has peaked , but is not falling very quickly.

MARKET REPORT / ANALYSIS

-Thursday the S&P 500 fell about 0.5% to 4327.

-VIX dipped about 5% to 30.49.

-The yield on the 10-year Treasury was 1.815%.  

 

Stocks were weak in the afternoon although one wonders if they’ve found some support in the 4325 region.

 

While Tuesday’s numbers looked really good (lower volumes and improvements everywhere) the market apparently does not agree.  Internals have deteriorated since then and Thursday was no exception. New-high/new-low data is getting much worse and other internals deteriorated, too. Still, the S&P 500 is only about 0.6% below Tuesday’s close so it is still possible (though less likely) that Tuesday will turn out to be near the low.

 

Investors didn’t like Intel’s quarterly results yesterday. Stephanie Link, CNBC commentator, described Intel as a “value trap” and said don’t go anywhere near this stock.

 

On the other hand, Microsoft is still holding on pretty well. MSFT was up 1% today.

 

Apple (AAPL) beat expectations on the top and bottom line. Its share price was up nearly 5% in after-hours trading. Along with Microsoft, this may be enough to end this pullback.

 

Pullback Data:

Days since top: 17 (Avg= 30 days for corrections <10%; 60 days for larger, non-crash pullbacks)

Drop from Top: 9.8%; (Avg.= 13% for non-crash pullbacks)

The S&P 500 is 2.4% below its 200-dMA.

The slope of the 200-dMA is still upward. If it turns down, it could generate some more selling.

 

The daily sum of 20 Indicators improved from -8 to -6 today (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -55 to -60 (The trend direction is more important than the actual number for the 10-day value.) 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 SELL. Volume & Price are bearish; VIX & Sentiment are Neutral. The important sell-signal was 12 Jan. Today is just a reminder that conditions remain bearish.

 

A few positive signs remain today. Technology was up, buoyed by strong earnings from Microsoft and Apple. The markets are still way overbought oversold.  RSI was 14 (30 is overbought oversold) and there have only been 5 up-days in the last month.

 

I am still in wait and see mode. I suppose I have to be bearish since we don’t have a definitive bottom yet.  Today was not the bottom, but the market doesn’t have to fall much farther. With Apple’s stellar earnings report and the current oversold conditions, I expect a positive day tomorrow. After that...I’m optimistic, but 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

 

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

 

THURSDAY 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. 

 

Today, I decreased my stock-allocation in the portfolio a little, but it remains about 45% invested in stocks. This is close to my “normal” fully invested stock-allocation of 50%. I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. If I can see a definitive bottom, I’ll add a lot more stocks to the portfolio using an S&P 500 ETF.

 

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.

FOMC Rate Decision ... New Home Sales ... EIA Crude Inventories … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

FOMC RATE DECISION (Reuters)

“The Federal Reserve on Wednesday signaled it is likely to raise U.S. interest rates in March and reaffirmed plans to end its bond purchases that month as well before launching what was characterized as a significant reduction in its asset holdings. The combined moves will complete the Fed's pivot away from the loose monetary policy that has defined the coronavirus pandemic era and toward a more urgent fight against inflation.” Story at...

https://www.reuters.com/business/finance/inflation-fighting-fed-likely-flag-march-interest-rate-hike-2022-01-26/

My cmt: Markets were ok at the release of the news, but fell hard during Chairman Powell’s press conference. Apparently, the market didn’t like the language that was perhaps more hawkish than expected.  He said, “Inflation risks are still to the upside in the views of most FOMC participants, and certainly in my view as well. There’s a risk that the high inflation we are seeing will be prolonged. There’s a risk that it will move even higher. So, we don’t think that’s the base case, but, you asked what the risks are, and we have to be in a position with our monetary policy to address all of the plausible outcomes.”

 

NEW HOME SALES (TribLive/AP News)

“Sales of new single family homes in December rose to their highest level in 10 months as buyers took advantage of lower prices in anticipation of higher interest rates. The increase put the seasonally adjusted annual sales pace to 811,000 for the month, according to the Commerce Department, an 11.9% increase over November’s figure...” Story at...

https://triblive.com/news/world/us-new-home-sales-jump-in-december-as-prices-fall/

 

EIA CRUDE INVENTORIES (EIA)

“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.4 million barrels from the previous week. At 416.2 million barrels, U.S. crude oil inventories are about 8% below the five-year average for this time of year.” Report at...

https://ir.eia.gov/wpsr/wpsrsummary.pdf

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5:00 PM ET 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.

If we focus on the box in the above chart we can see (below) that the 10-dMA of new-cases and the smoothed 10-day has peaked.

MARKET REPORT / ANALYSIS

-Wednesday the S&P 500 fell about 0.2% to 4349.

-VIX rose about 3% to 31.96.

-The yield on the 10-year Treasury rose to 1.869%.  

 

I hope my blog isn’t too confusing at market turns.  Tuesday, we had the Long-Term Ensemble still giving a SELL sign while I suggested that the markets may have bottomed and were giving a buy-signal. My buy-calls are based on market internals and market action.  The Long-Term Indicator Ensemble is good for sell-signals, but it can be very slow to give buy-signals after a bottom.  

 

I wrote yesterday that I decided to buy Tuesday and increase my stock holdings to about 45% of the total portfolio. “I’ll decide whether to buy more depending on market action going forward.” Needless to say, I didn’t buy more Wednesday. The market action was not good during and after the Fed press conference.

 

Pullback Data

Days since top: 16 (Avg= 30 days for corrections <10%; 60 days for larger, non-crash pullbacks)

Drop from Top: 9.3%; 12% intraday (Avg.= 13% for non-crash pullbacks)

The S&P 500 is 1.9% below its 200-dMA.

 

The daily sum of 20 Indicators declined from -3 to -8 today (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -51 to -55 (The trend direction is more important than the actual number for the 10-day value.) 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 SELL. Volume, VIX & Price are bearish; Sentiment is Neutral. The important sell-signal was 12 Jan. Today is just a reminder that conditions remain bearish.

 

I may have started buying too soon. Volume increased and that is bearish and Sentiment may be sending a clue that I should have considered.

 

I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in selected Rydex/Guggenheim mutual funds. Surprisingly, sentiment is more bullish now, 94%-bulls on a 5-day basis, than it was when the S&P 500 topped out 3 weeks ago. Then it was 92%-bulls. I keep hearing that Investors surveys have gotten bearish.  Sure, they have; but rather than ask people whether they are bearish, I’d rather see how they are invested. The answer is they are still way too bullish (at least in Guggenheim funds). This may have to change before we see a bottom.

 

There were a few positive signs today. Technology was up, buoyed by strong earnings from Microsoft yesterday and Intel today. A similarly bullish report from Apple on Thursday could end the pullback. The markets are still way overbought.  RSI was 15 (30 is overbought) and there have only been 6 up-days in the last month.

 

Still, it’s hard to be bullish after today’s action.  I will wait and see what happens tomorrow.

 

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

 

WEDESDAY 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. 

 

Tuesday, I increased my stock-allocation in the portfolio to about 45% invested in stocks. This is close to my “normal” fully invested stock-allocation of 50%. I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. If I can see a definitive bottom, I’ll add a lot more stocks to the portfolio using an S&P 500 ETF.

 

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.