“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Reporting [by Nina Totenberg of NPR] that Justice
Sotomayor asked Justice Gorsuch to wear a mask surprised us. It is false. While
we may sometimes disagree about the law, we are warm colleagues and friends.”- Chief Justice
Roberts, Justice Sotomayor.
LEADING ECONOMIC INDEX (Conference Board via
PRnewswire.com)
“The Conference Board Leading Economic
Index® (LEI) for the U.S. increased by 0.8 percent in December
to 120.8...’The U.S. LEI ended 2021 on a rising trajectory, suggesting the
economy will continue to expand well into the spring,’ said Ataman
Ozyildirim, Senior Director of Economic Research at The Conference Board. ‘For
the first quarter, headwinds from the Omicron variant, labor shortages, and
inflationary pressures—as well as the Federal Reserve's expected interest rate
hikes—may moderate economic growth. The Conference Board forecasts GDP growth
for Q1 2022 to slow to a relatively healthy 2.2 percent (annualized). Still,
for all of 2022, we forecast the US economy will expand by a robust 3.5
percent—well above the pre-pandemic trend growth.’" Press release at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 9:00 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 has not increased over the last couple of days.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell
about 1.9% to 4398.
-VIX rose about 13% to 28.85.
-The yield on the 10-year Treasury slipped to 1.763%.
There were increased volumes, partly due to Options
Expiration today. Volumes still weren’t high enough to suggest a bottom. That big, flush-out day is still on the horizon.
On CNBC Kelly asked whether Options were causing the downturn. Chris Murphy of Susquehanna
replied, “Although it [options activity] is not the primary driver of the
downturn...We are getting closer to a bottom.”
Pullback Data
Days since top: 13 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: 8.3% (Avg.= 13% for non-crash pullbacks)
The S&P 500 is 0.7% below its 200-dMA.
The Friday run-down of some important indicators turned
more to the Bear side (20-bear and 4-bull), but there are more bull signs, too.
Signs are bearish, but we are probably getting closer to a bottom. 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
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500.
-RSI is oversold.
-Bollinger Bands are oversold.
-Overbought/Oversold Index (Advance/Decline Ratio) is
oversold.
NEUTRAL
-There have been 4 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This can be a bull or bear. Now
it’s neutral.
-The S&P 500 is 0.7% 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.)
-11 January, the 52-week, New-high/new-low ratio improved
by 2.1 standard deviations somewhat bullish, but not enough to send a signal.
-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.
-Non-crash Sentiment indicator is bullish (95%-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 today. 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 7 up-days over the last 20 sessions – This
would be bullish, but this indicator works with Sentiment and sentiment is not
giving a bull signal - Neutral.
-There have been 3 up-days over the last 10 sessions – Leaning
bullish, but still Neutral.
-The Calm-before-the-Storm Indicator.
-There was a Hindenburg Omen signal on 10 January. It has been cancelled because the McClellan
Oscillator turned positive.
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-My Money Trend indicator is falling.
-The Smart Money (late-day action) is headed down. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-The S&P 500 has had 8 Distribution Days in the last
25-days.
-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 27 consecutive days. (3 days in a row is my bear signal)
-McClellan Oscillator.
-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. Strong bearish signal now.
-Short-term new-high/new-low data is falling.
-Long-term new-high/new-low data is falling.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-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 the top is likely to be >10%.
-VIX.
-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.
-Only 36% 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 20 bear-signs and 4 bull-signs. Last week, there were 15 bear-signs and
2 bull-signs.
The short-term daily indicators improved:
The daily sum of 20 Indicators improved from -8 to -7 today
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -59 to -58 (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.
Volumes were high and internals were worse. Friday was not the bottom.
I remember that years ago, Jeffrey Saut had a comment that
may be appropriate to repeat now. He said, “...we could be in one of these
“selling stampedes” that tend to last 17 – 25 sessions, with only 1-and-a-half
to three-day pauses/throwback rallies, before they exhaust themselves on the
downside...I also said that it was too soon to tell yet if this is such a
stampede, but “Never on a Friday.” The reference was that once the markets get
into one of these weekly downside skeins, they rarely bottom on a Friday. Nope,
they typically give participants over the weekend to brood about their losses
and then they show up the next Monday in ‘sell mode’ leading to Turning
Tuesday.” We’ll be watching for a possible turning Tuesday.
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
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.
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.
