“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Faced with a combination of record speculative extremes
and deteriorating speculative conditions, investors may want to remember that
the best time to panic is before everyone else does.” – John Hussman, Phd.
LEADING ECONOMIC INDEX (Conference Board)
“The Conference Board Leading Economic Index® (LEI)for
the U.S. decreased by 0.3 percent in January to 119.6 (2016 = 100), following a
0.7 percent increase in December and a 0.8 percent increase in November... “Despite
this month’s decline and a deceleration in the LEI’s six-month growth rate,
widespread strengths among the leading indicators still point to continued,
albeit slower, economic growth into the spring. However, labor shortages,
inflation, and the potential of new COVID-19 variants pose risks to growth in
the near term.” Report at...
https://www.conference-board.org/topics/us-leading-indicators/press/us-lei-feb-2022
“The composite economic indexes are the key elements in
an analytic system designed to signal peaks and troughs in the business cycle.”
– Conference Board.
EXISTING HOME SALES (YahooFinance)
“Home sales in the U.S. jumped in the first month of
2022, while the number of homes for sales hit a new record low.
Existing home sales rose 6.7%...”
https://finance.yahoo.com/news/existing-home-sales-january-2022-150005564.html
Let’s look at the Covid chart again just to see why localities
are lifting Covid mandates. The only bad news is that the numbers appear to be
leveling off round 175,000 cases per day.
Hopefully that’s a trend that won’t continue!
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 0.7% to 4349.
-VIX slipped about 1% to 27.75.
-The yield on the 10-year Treasury slipped to 1.928%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 33 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 9.3%; Max closing: 9.8%; Max intraday:
12% (Avg.= 13% for non-crash pullbacks)
The S&P 500 is 2.4% BELOW its 200-dMA & 5.2%
BELOW its 50-dMA.
Max Retracement from bottom: 56% 2 Feb.
The slope of the 200-dMA is up, but just barely.
The Friday run-down of some important indicators got more
bearish from last week to (17-bear and 3-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
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 2 February.
-The Smart Money (late-day action) is bullish. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-There have been 5 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This looks bullish since the last 4
have all been down.
NEUTRAL
-The S&P 500 is -2.4% above 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.)
-The S&P 500 has had 3 Distribution Days, since the
last follow-thru day on 31 Jan, but it takes more to send a signal.
-Bollinger Bands.
-RSI
-Overbought/Oversold Index (Advance/Decline Ratio)
-15 February, the 52-week, New-high/new-low ratio
improved by 2 standard deviations-Neutral
-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.
-The S&P 500 Index is OK when compared to the issues
advancing on the NYSE (Breadth).
-Non-crash Sentiment indicator is too high (93%-bulls on
a 5-day basis), but not enough to give a sell signal. (Too bullish is bearish.)
-No 90% up or down days.
-The Fosback High-Low Logic Index is neutral, but has
moved toward bear territory.
-There have been 10 up-days over the last 20 sessions.
-There have been 4 up-days over the last 10 sessions.
-The Calm-before-the-Storm/Panic Indicator.
-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 indicated that the advance was too
narrow and a correction was likely to be >10%. - Expired
BEAR SIGNS
-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 48 consecutive days. (3 days in a row is my bear signal)
-MACD of S&P 500 price made a bearish crossover, 17
February.
-VIX is rising sharply.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500 in the short-term.
-My Money Trend indicator is falling.
-44% of the 15-ETFs that I track have been up over the
last 10-days.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-Smoothed Buying Pressure minus Selling Pressure is falling.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-McClellan Oscillator.
-Short-term new-high/new-low data is falling.
-Long-term new-high/new-low data is falling.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions.
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 17 bear-signs and 3 bull-signs. Last week, there were 12 bear-signs and
7 bull-signs.
The daily sum of 20 Indicators remained -4 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations dropped from +12 to -19 (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 to SELL. Volume & VIX are bearish; Price & Sentiment
are Neutral.
The S&P 500 dipped down to the prior low of 4327
around 1pm and bounced straight up. I guess the Wall St computers said buy at
the low. The bounce faded some and the S&P 500 closed 0.5% higher than the
prior correction low of 4327.
I would like to see the S&P 500 drop below its correction
low or at least get very close, but the markets don’t usually pay attention to
what I want. Today might have been the low of the current dip. Volumes were
down and market internals improved, but we really want to see a lower-low. A
lower-low would give me more confidence that the correction is over, assuming
we see improvement in internals and positive divergences.
You may wonder why I am not writing about indicators, but
indicators are less important now. Many
are trend following and can be slow to turn bullish. We’d like to be able to
call the bottom. One indicator that is turning bullish is late-day-action. That’s when the Pros act and it looks like
they are starting to buy. The Pros don’t try to pick the exact bottom, but they
do tend to buy around the bottom, before and after.
For now, I’ll watch the action Tuesday. I might add to
stock positions if Tuesday is a big up-day. (Monday is Presidents Day, Washington’s
birthday, and stock markets are closed.) I am not confident, because I didn’t see strong positive signs today and we
still have the Russian Commies preparing to invade Ukraine.
Until we see some more bullish signs, I am bearish.
TRADING POSITIONS:
XLE; Purchased Wednesday, 26 January
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)
My basket of Market Internals remained 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.
My stock-allocation in the
portfolio is about 40% invested in stocks. This is below 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.
