“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...
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...
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.
