“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
EARNINGS SEASON UPDATE 11 FEB 2022 (FactSet)
“At this point in time, the number of companies beating
EPS estimates is above the five-year average, but the amount by which companies
are beating estimates is equal to the five-year average. As a result, the index
is reporting higher earnings for the fourth quarter today relative to the end
of last week and relative to the end of the quarter. The index is reporting
earnings growth of more than 30% for the fourth straight quarter and earnings
growth of more than 45% for the full year. These above-average growth rates are
due to a combination of higher earnings in 2021 and an easier comparison to
weaker earnings in 2020 due to the negative impact of COVID-19 on a number of
industries.” Report at...
https://insight.factset.com/sp-500-earnings-season-update-february-11-2022
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 0.4% to 4402.
-VIX rose about 4% to 28.33.
-The yield on the 10-year Treasury rose to 1.988%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 29 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: Now 8.2%; Max closing: 9.8%; Max intraday:
12% (Avg.= 13% for non-crash pullbacks)
The S&P 500 is 1.2% BELOW its 200-dMA & 4.4%
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 declined
from last week to 12-bear and 7-bull. Those numbers probably got worse today,
but I didn’t try to add them up. At least one indicator improved.
The S&P 500 (Black) improved relative to Utilities as can be seen on the chart below. A rising red line indicates an improving spread, i.e., the Index is outpacing Utilities. It is above zero and headed higher; that is a bullish indication. If investors are worried they tend to buy defensive stocks like Utilities.
The daily sum of 20 Indicators declined from -3 to -10 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations dropped from +43 to +27 (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 dropped to SELL. VIX & Volume are bearish; Price & Sentiment
are Neutral.
As I noted Friday, it looks like the S&P 500 will
test its prior low of 4327. The waterfall decline is usually the low. My guess
is that the low will hold (more or less) and we will see markets move up from
there. That’s what I think. As I noted
earlier today, the motto of this blog is, “Trade what you see; not what you
think.” With that in mind, I reduced stock holdings today based on the
Sell-signal and the knowledge it is sometimes better not to think. I may think
the market won’t fall much farther, but why take the risk? (I am probably
guilty of overtrading this decline.)
I am neutral to somewhat bearish.
POSITIONS ADDED:
Wednesday, 26 January: AAPL; XLE;
Monday, 31 January: QLD; SPY
POSITIONS SOLD:
QLD, 10 February.
APPL, 11 February
SPY, 14 February
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 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.
