“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
RALLY AT KEY LEVELS; WHAT TO DO NOW (Investors.com)
“When the market breaks expectations, you can't stick
with the old script. The stock market is not yet in a correction, but the
uptrend is under increasing pressure. Growth names arguably have been in a
correction for months. With Tesla struggling and many other megacaps aside from
Apple testing or undercutting recent lows, that's becoming more obvious. Investors
should be defensive.” Commentary at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 4:30 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.
Today is day 15 of my Omicron odyssey. I still have sinus congestion, but I tested negative for Covid so no worries about contagion
at this point. All in all, Omicron was
similar to an extended head-cold that included a sinus infection. We are
visiting family in California. None of the 3 children (4,5 and 9-months) or
their parents developed any signs of infection.
Since neither my wife nor I quarantined (other than staying in the
house), I suspect they have already been exposed. They were all vaccinated except for the baby.
Bottom line: I don’t see that closings and hysteria over Covid are warranted
now. Omicron doesn’t seem to be a big threat. As I write this, Virginia has declared
a state of emergency due to the record Covid-19 surge.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 slipped about 0.1% to 4670
-VIX rose about 5% to 19.74
-The yield on the 10-year Treasury was down slightly to
1.766%.
The S&P 500 closed 0.1% below its 50-dMA. The last
time it dipped lower than the 50-dMA the markets recovered with no harm
done. I doubt that we’ll be as lucky
this time, but the S&P 500 recovered into the close (I called that one
wrong in my earlier post today.) and is not too far below the 50-dMA.
There was a Hindenburg Omen on the S&P 500 / NYSE
today. The Hindenburg Omen is a stock market indicator named after the famous
crash of the Hindenburg dirigible in New Jersey in 1937. As we’ve noted before,
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
Repeating: I still expect that this pullback will exceed
10% based on the narrow advance at the high. Only 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. This indicates that the advance is too narrow and a correction from
here is likely to be >10%.
We also noted last week that the Friday run-down of some important
indicators turned sharply to the Bear side (13-bear and 6-bull). I don’t think indicators
improved today.
The daily sum of 20 Indicators declined from -8 to -10
today (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations declined from +10 to -4 (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. Price is Bullish; Volume is bearish; VIX &
Sentiment are Neutral. The LT indicator was SELL earlier in the day, but the late-day
recovery improved the indicator to HOLD.
Like Friday, from here we
should still be watching the 50-dMA. The
Index is just barely below it. Given the current bearish signs, a break lower
suggests a real correction is likely (but not guaranteed).
I’d expect Tuesday to be an
up-day. We’re due for one just based on
the number of down-days we’ve seen recently.
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 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 35% 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.
The market is still about the
50-dMA. If that level fails, it will tend to confirm the downtrend.
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.
