“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.
HOUSING STARTS / BUILDING PERMITS (Yahoo Finance /
Reuters)
“U.S. homebuilding unexpectedly fell in September and
permits dropped to a one-year low amid acute shortages of raw materials and
labor, supporting expectations that economic growth slowed sharply in the third
quarter... Housing starts dropped 1.6%...With building costs mounting, permits
for future homebuilding plunged 7.7%...” Story at...
https://www.yahoo.com/now/u-housing-starts-permits-tumble-123711801.html
JOBLESS CLAIMS (FOXnews)
“The number of Americans filing for unemployment benefits unexpectedly
ticked up last week, rising for the first time in a month despite elevated business
demand for workers and easing omicron cases nationwide...applications for the
week ended Feb. 12 rose to 248,000...” Story at...
https://www.foxbusiness.com/economy/jobless-claims-coronavirus-pandemic-feb-12-2022
PHILADELPHIA FED INDEX (fxStreet)
“According to a report from the Federal
Reserve Bank of Philadelphia released on Thursday, the headline
Manufacturing Activity Index of the Manufacturing Business Outlook Survey
fell to 16.0 in February from 23.2 in January, bigger than the
expected decline to 20.0.” Details at...
THERE’S GONNA BE ANOTHER BIG DROP (msn.com)
“Palumbo Wealth Management's chief investment officer
Philip Palumbo advised equities investors to "sell the rip, rather than
buy the dip" on Wednesday, citing rising inflation as the biggest threat
to the stock market.” Video at...
'There's
gonna be another big drop in the market' -CIO (msn.com)
TOP DOLLAR FOR TOP DOLLAR (Hussman Funds)
“Why is it so hard to accept that speculative bubbles can
burst? Interest rates were driven to zero for a decade. Yield-starved investors
chased stocks to valuations beyond the 1929 and 2000 extremes. That speculation
front-loaded more than a decade of future market gains into the present. Those
gains are now behind us, embedded in breathtaking multiples. If history is any
guide, a collapse in valuations is likely to return those gains to the future...
...Our gauges of market internals remain unfavorable, and
valuations remain obscene. The market capitalization of non-financial and
financial corporate equities hit $67 trillion at the recent peak. That’s a lot
of stock market capitalization. The ratio of U.S. market cap/GDP began 2022 at
a record extreme of 2.82, compared with a multiple of 1.88 at the 2000 bubble
peak, and a historical norm of just 0.78. When you look at market
capitalization, recognize that as much as 72% of it may be air. That is the
hazard...”
John Hussman, Phd. Full commentary and analysis at...https://www.hussmanfunds.com/comment/mc220210/
My cmt: A 72% decline is possible? Ouch!
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell about 2.1% to 4380.
-VIX jumped about 16% to 28.11.
-The yield on the 10-year Treasury slipped to 1.964%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 32 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 8.7%; Max closing: 9.8%; Max intraday:
12% (Avg.= 13% for non-crash pullbacks)
The S&P 500 is 1.7% BELOW its 200-dMA & 4.7% BELOW
its 50-dMA.
Max Retracement from bottom: 56% 2 Feb.
The slope of the 200-dMA is up, but just barely.
The daily sum of 20 Indicators improved from -6 to -4 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum that
smooths the daily fluctuations dropped from +6 to -12 (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 declined to SELL. Volume & VIX are bearish; Price & Sentiment
are Neutral.
I wrote yesterday that there were at least 3 signs that I
am looking for that might get me back in the market. I want to see significant
improvement in: New-high, new-low data; my Market Internal ensemble; and Money
Trend. The Market Internal ensemble did improve, but the other two were worse.
The S&P 500 closed 1.2% higher than the prior
correction low of 4327. If the Index tests its correction low, we’ll get some
more information that may help us decide whether the markets are going lower,
or if it is time to buy. Since the double top high at 4589, volumes have not increased
during this renewed sell-off. That looks bullish, but the retest will be important.
Until we see some more bullish signs, I am bearish. I’ll
watch for the retest of the low.
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
THURSDAY MARKET INTERNALS
(NYSE DATA)
My basket of Market Internals improved to 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.
