“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.
I got busy today and almost forgot to post. Here’s today’s
report...
ADP EMPLOYMENT CHANGE (ADP)
“Private sector employment increased by 455,000 jobs from
February to March according to the March ADP® National Employment
ReportTM...“Job growth was broad-based across sectors in March, contributing to
the nearly 1.5 million jobs added for the first quarter in 2022,” said Nela
Richardson, chief economist, ADP. “Businesses are hiring, specifically among
the service providers which had the most ground to make up due to early
pandemic losses. However, a tight labor supply remains an obstacle for
continued growth in consumer-facing industries.” ADP report at...
GDP (Yahoo Finance)
“The real gross domestic product (GDP) increased at an annual rate of 6.9% in the fourth quarter
of 2021, according to the Bureau of Economic Analysis (BEA), and the economy grew at a 2.3% rate in the third quarter.” Story
at...
https://finance.yahoo.com/news/gdp-downgraded-slightly-back-6-165245312.html
EIA CRUDE OIL INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 3.4 million barrels from the
previous week. At 409.9 million barrels, U.S. crude oil inventories are about
14% below the five-year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
Low and falling inventories suggest higher prices.
BOND MARKET INVERSIONS (RIA)
“Every time the 10/2 curve inverts, market participants
come out with a long list of reasons why the curve’s slope tells us little
about the current environment and should have no correlation with a recession. We
all know what happens subsequently.” - Ed Al-Hussainy of Columbia Threadneedle.
“For the past half-century or so, what happens
subsequently is a recession...
...Currently, only 10% of the 10-spreads we track are
inverted. As such, there is no reason
to become overly defensive just yet. But you should be at least paying
attention.” – Lance Roberts, RIA.
https://realinvestmentadvice.com/inverted-yield-curve-history-should-worry-bulls/
Good discussion on Yield Curve Inversion at the Real
Investment link above.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 0.6% to 4602.
-VIX rose about 2% to 18.90.
-The yield on the 10-year Treasury slipped to 2.338%.
I think the correction is over, but not everyone agrees
so I’ll keep the pullback data for a while longer.
PULLBACK DATA:
If the correction has ended:
-Drop from Top: 13% (Avg.= 13% for non-crash pullbacks)
-Days from Top to Bottom: 48-days. (Avg= 30 days top to
bottom for corrections <10%; 60 days top to bottom for larger, non-crash
pullbacks)
Currently:
Days since top: 60 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 2.5%. Max at close: 13%
The S&P 500 is 2.7% ABOVE its 200-dMA & 4.3%
ABOVE its 50-dMA.
TODAY’S COMMENT:
Good news today – new-52-week lows improved a lot. There were only 25 new-lows today while there
were 120 new-highs. The Fosback Hi-Lo Logic Index (see Friday’s blog) responded
by stepping away from the cliff so that there is more breathing room. I’ll still be watching since the indicator is
not out of the woods yet, but the Fosback Hi-Low Logic index started moving in a
less bearish direction. (I won’t call it bullish yet – it’s still much closer
to a sell-signal than a buy-signal.
Currently, none of my top-indicators are warning of a
top. 28 of the 30 Dow stocks have been up over the last 10-days. That’s very bullish. I suspect that the
markets can go higher before they experience a corrective pullback. I don’t
expect anything big. Longer term indicators remain very bullish. In the near
term, when Bollinger Bands and RSI are both overbought, we can expect a
pullback maybe in the 3-5% range. A top would be most likely to happen on a big
move up, say greater than 1.6%-2% up.
The daily sum of 20 Indicators declined from +16 to +5 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +124 to +128 (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, are Bullish; VIX & SENTIMENT are
hold.
I am a Bull, but I’ll be quick to reduce stock holdings
if indicators warrant it.
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
BEST DOW STOCKS - TODAY’S MOMENTUM
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDNESDAY 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 now about 60% 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.
