“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.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 slipped about 2 points to 4461.
-VIX fell about 1% to 23.52.
-The yield on the 10-year Treasury rose to 2.294%.
I think the correction is over, but not everyone agrees
so I’ll keep the pullback data for a while longer.
Pullback Data:
Days since top: 53 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 7% at close. Max at close: 13% (Avg.=
13% for non-crash pullbacks)
The S&P 500 is 0.2% below its 200-dMA & 0.7% above
its 50-dMA.
TODAY’S COMMENT:
Around 12:30 today, Fed Chair Powell said that he is open
to a half-point rate hike if inflation warrants it. That comment rattled the
markets and the S&P 500 fell from positive territory in the afternoon, but
managed to rally back to nearly even at the close.
Sentiment turned Bullish yesterday. I measure Sentiment as
%-Bulls (Bulls/{bulls+bears}) based on the amounts invested in selected
Rydex/Guggenheim mutual funds. My sentiment indicator is now (as of Friday) 81%-bulls
and that is low enough to give a Buy-signal.
81%-bulls doesn’t seem all that low, but on a standard deviation basis
over the last year and a half, it is now so bearish that it is bullish. The
last bullish signal was about 2 weeks after the October 2021 correction low. This
indicator is often late as investors get more bearish after a bottom.
I noted Friday that The Friday run-down of some important
indicators reversed sharply to the bullish side (4-bear and 12-bull). Today,
there were 2 more bullish signs: The 5-10-20 Timer system and MACD of Breadth both
turned bullish today. I decided to
follow my indicators.
The Overbought/Oversold ratio is overbought. That is not a surprise given the recent
bullish action. The markets can be
overbought (or oversold) for some time so I am not worried about this new bear
sign. Market pros rend to ignore this older indicator anyway, although sometimes
it can be useful for predicting very short-term moves.
The daily sum of 20 Indicators improved from +15 to +16
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +43 to +55 (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 BUY: PRICE, VOLUME, VIX & SENTIMENT are Bullish. That
almost never happens. The 1st Buy signal was 4 days after the low. That’s unusual too, the Long-Term indicator
can be slow to issue Buy-signals. Bottom line, I will pay attention.
As odd as it seems, I am now a Bull. Currently, the S&P500 is stalled at its
200-dMA. Let’s see if the Index can
climb above it tomorrow.
While the correction seems to be over, the question is
what will happen when the markets get back to the old highs? I am not
optimistic for this year as a whole.
BEST ETFs - 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
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.
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.
I re-purchased XLE
(Energy-ETF) today and added SPY in the 401k. My stock-allocation
in the portfolio is now about 55% invested in stocks. This is above 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.
