“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
JOBLESS CLAIMS (CNBC)
“Initial filings for unemployment claims totaled a bit
fewer than expected last week as companies looked to overcome the impact of the
omicron spread. Claims for the week ended Jan. 29 totaled 238,000, a touch
lower than the 245,000 Dow Jones estimate...” Story at...
https://www.cnbc.com/2022/02/03/weekly-jobless-claims-total-238000-less-than-expected.html
PRODUCTIVITY (Bloomberg)
“U.S. productivity surged last quarter by the most in
more than a year, reflecting a sharp acceleration in economic output, while
labor costs growth cooled. Fourth-quarter nonfarm business employee output per
hour increased at a 6.6% annual rate from the previous three months...” Story
at...
ISM NON-MANUFACTURING INDEX (ISM via PRnewswire)
“Economic activity in the services sector grew
in January for the 20th month in a row — with the Services
PMI® registering 59.9 percent — say the nation's purchasing and supply
executives in the latest Services ISM® Report On
Business®... "According to the Services PMI®, 15 services industries
reported growth. The composite index indicated growth for the 20th consecutive
month after a two-month contraction in April and May
2020. Although there was a pullback for most of the subindexes in
January, the rate of growth remains strong for the services sector, which has
expanded for all but two of the last 144 months. Respondents continue to be
impacted by coronavirus pandemic-related supply chain issues, including
capacity constraints, demand-pull inflation, logistical challenges and labor
shortages. Moreover, the COVID-19 omicron variant has disrupted operations,
especially through reduced staffing levels. Despite these impediments, business
activity and economic growth continue." Press release at...
FACTORY ORDERS (foreXlive)
“Factory orders come in as expected at -0.4%. The prior
month was at 1.8%.” Story at...
https://www.forexlive.com/news/us-factory-orders-for-december-04-versus-04-estimate-20220203/
WORST OUTFLOWS FOR SPY
The $407 billion SPDR S&P 500 ETF Trust, known by its
ticker SPY, in January saw its biggest redemption since launching in 1993,
according to data compiled by Bloomberg, underscoring weeks of turmoil in U.S.
large-cap companies. Some $6.96 billion exited Monday alone -- the largest
daily outflow in almost four years -- as the S&P 500 jumped
1.9%...“Investors are worried the rally could be a head fake,” said Athanasios
Psarofagis, an ETF analyst with Bloomberg Intelligence. “These feel like
sell-into-strength flows.” Story at...
https://finance.yahoo.com/news/worst-ever-outflows-spy-etf-132900472.html
BUYING THE DIP? BETTER BUCKLE YOUR SEAT BELT (msn.com)
“LPL Financial chief market strategist Ryan Detrick
points out that poor January performance has historically been followed by
weakness in February. Data collected by LPL going back to 1960 showed that
after drops of 5% or more in the S&P 500, February performance has been
lower six of the past seven times, with muted returns over the final 11 months
of the year. To add to that, February has been one of the worst months of the
year for the index since 1950, with only September being worse... [not everyone
agrees]
...’While it’s always hard to predict the bottom of any
market sell-off, we believe the risk-reward for U.S. stocks is getting
attractive,’ UBS equity strategist David Lefkowitz wrote in a recent note...
... ‘The equity market sell-off is overdone in our view,
and we reiterate our call to buy the dip, particularly in cyclicals and small
caps," said JPMorgan strategist Marko Kolanovic in a new
research note.” Story at...
Investors
buying the dip ‘better buckle up their seat belts’ (msn.com)
STRUGGLING TO FIND A LOW (Heritage Capital - Posted 28
Jan)
“This past Monday we saw the first sign of panic and
despair in the stock market. It was enough to see a massive intra-day reversal.
In the old days, you know, like before Q4 2018, we used to call Monday the
internal or momentum low. That’s the low where the majority of stocks are at
their worst. In 2008 that low was in October, even though we didn’t see the
final price bottom until March 2009.” – Paul Schatz, President, Heritage Capital.
Commentary at...
https://investfortomorrow.com/blog/stock-market-struggling-to-find-a-low/
HERE’S THE BOUNCE (Heritage Capital - Posted 1 Feb)
“...last Monday still looks like the internal or momentum
low for the decline where the most stocks see the most damage. I already posted
charts on the number of stocks making new lows as well as how the usually wrong
options crowd is positioning. There is more to come. The bounce was late to
start and on the feeble side so far. That tells me to sell rallies for now,
especially in things I own but do not love.” Commentary at...
https://investfortomorrow.com/blog/heres-the-bounce/
ONE MORE COVID STORY???
“Johns Hopkins professor blasts his OWN college and the
mainstream media for not publicizing study that found COVID lockdowns only
reduced deaths by 0.2% because it doesn't fit their 'narrative’ (Daily Mail)
“A Johns Hopkins professor slammed his university and the
mainstream media for downplaying a study conducted by economists at the
university that found that COVID-19 lockdowns
only reduced virus deaths by 0.2 percent...They warned that lockdowns caused
'enormous economic and social costs' and concluded that they were 'ill-founded
and should be rejected as a pandemic policy instrument' going forward. ”
Story at...
The article stated that the lockdowns actually increased
the death rate due to deferred medical care.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell about 2.4% to 4477.
-VIX rose about 10% to 24.35.
-The yield on the 10-year Treasury rose to 1.845%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 22 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: Now 6.7%; Max intraday: 12% (Avg.= 13% for
non-crash pullbacks)
The S&P 500 is 0.8% above its 200-dMA & 3.1%
below its 50-dMA.
Retracement from bottom: 56% Wednesday; 32% Thursday.
The slope of the 200-dMA is up.
The recent pullback accelerated into a waterfall drop
soon after it began. Usually, that
waterfall low is very near the final low if there is a retest of that low. As
Paul Schatz says above, years ago a retest would be the norm. Now, I don’t know.
When I examined volume and new-lows, both seemed like they were extreme enough
to avoid a retest, but I don’t have the rules to say either way. The bounce got
up to around a 50% retracement off the low and that is a retracement point
where rallies do sometimes fail.
Paul Schatz says, “There’s more to come” so he is clearly
looking for a retest. At that point we
would have more information on whether the markets will bounce back or fall
even lower.
For now, I plan to hold on. There is one signal that has
gotten more bullish. I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based
on the amounts invested in selected Rydex/Guggenheim mutual funds. My Sentiment
indicator is finally getting closer to a bearish, buy-zone. That would be a
decent bullish signal if sentiment does go low enough.
Today was a statistically significant down-day. That just
means that the price-volume move exceeded my statistical parameters. Statistics
show that a statistically-significant, down-day is followed by an up-day about
60% of the time.
Amazon was up around 18% in after-hours today. That another sign that may help investors
tomorrow. QQQ is up about 2% after hours, too. That will help my QLD trade
tomorrow it carries over.
The daily sum of 20 Indicators dropped from +9 to +2 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -17 to -7 (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 HOLD. VIX, Price, Volume & Sentiment are Neutral.
I am cautiously bullish.
The S&P 500 still needs to break back above its 50-dMA. The bulls
don’t want to see the S&P 500 fall below its 200-dMA.
POSITIONS ADDED:
Last week: AAPL; XLE;
Monday: QLD; SPY
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)
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 65% invested in stocks. This is above my “normal” fully
invested stock-allocation of 50%. I will hold this trading-position for a
while, but it will not be a long-term hold.
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.
