“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
HOUSING STARTS / BUILDING PERMITS (CNBC)
“U.S. homebuilding increased to a nine-month high in
December amid a surge in multi-family housing projects, but soaring prices for
materials after the government nearly doubled duties on imported Canadian
softwood lumber could hamper activity... Permits for future homebuilding jumped
9.1% to a rate of 1.873 million units in December.” Story at...
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 4.6 million barrels from the
previous week. At 413.3 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
MARKET SELLOFF (Real Investment Advice)
“According to StockTrader’s
Almanac, the direction of January’s trading (gain/loss for the month) has predicted the
course of the rest of the year 75% of the time...Furthermore,
thirteen of the last seventeen presidential election years followed January’s
direction. Speaking of Presidential election years, the second year of the
Presidential cycle statistically has the second-lowest average return rate with
roughly a 63% chance of being a positive year...I have no idea what this year
holds...The current market selloff, and rotation to value, may undoubtedly be
essential clues. With market valuations elevated, leverage high, and economic
growth and profit margins set to weaken, investors should be paying close
attention.” – Lance Roberts. Commentary at...
https://realinvestmentadvice.com/market-selloff-into-january/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 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 there were more than a million new cases today.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell about 1.0% to 4533.
-VIX rose about 5% to 23.85.
-The yield on the 10-year Treasury slipped to 1.869%.
Pullback Data
Days since top: 11 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: 5.5% (Avg.= 13% for non-crash pullbacks)
There were a couple of important bottom signs today; both
RSI and Bollinger Bands are oversold for the S&P 500. In the recent past
these have signaled the end of pullbacks. Still, oversold conditions can last for
a long time, so we’d like to see other confirming signals.
Volume was lower suggesting less selling; advancing issues
improved too. Other internals got worse so there was no clear signal here. The
Pros are looking at the same numbers I do.
If they were convinced today was a bottom, one would expect late-day buying. Instead, we saw late-day selling.
In addition, Utilities outpaced the S&P 500 by a lot
today suggesting the Pros are still worried. Overall indicator numbers did not
improve either.
The daily sum of 20 Indicators remained -8 today (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from -39 to -53 (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 are bearish; Price & Sentiment are
Neutral. The important sell-signal was 12 Jan. Today is just a reminder that
conditions remain bearish.
The S&P 500 closed well below its 100-dMA today,
another worrisome sign for the bulls. The Index is 2.4% above its 200-dMA. That may be the bottom of the pullback although
it is easy to make arguments for a much deeper correction. Longer term charts
would suggest a bottom of 4000 or lower.
As I often say, Mr. Market doesn’t pay attention to my
comments so if Thursday is a really big up-day, I might be induced to increase
my stock positions a little. With RSI and Bollinger Bands oversold, we do need
to be open to the possibility that Wednesday was a bottom even though the evidence isn't strong.
I remain a Bear until proven
otherwise.
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 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.
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.
