“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.
IHS MARKIT COMPOSITE PMI (Markit Economics)
“Latest ‘flash’ PMI™ data from S&P Global signalled a
strong, but slower increase in business activity across the US economy in
April. Although still faster than January’s Omicron-induced slowdown, overall
growth was dampened by a softer rise in service sector output following
pressure on customer spending as prices continued to increase markedly.
Manufacturers, on the other hand, indicated a stronger expansion in production
on the back of rising demand. The headline Flash US PMI Composite Output Index
registered 55.1 in April, down from 57.7 in March.” Press release at...
https://www.markiteconomics.com/Public/Home/PressRelease/8d55cfa69f8e4e6eb8e54215dc3f22d6
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 2.8% to 4272.
-VIX rose about 24% to 28.21.
-The yield on the 10-year Treasury rose to 2.896%.
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:
If the correction has not ended:
Days since top: 76 (Avg= 60 days top to bottom for
>10% non-crash pullbacks)
Drop from Top: Now 10.9%. Max at close: 13%
The S&P 500 is 5% BELOW its 200-dMA & 3.1% BELOW
its 50-dMA.
*We can’t call the end of the correction until the
S&P 500 makes a new high. If it makes a new low, then the correction has
obviously not ended.
TODAY’S COMMENT:
Talk about a broad-based selloff...of the 45 issues + Junk
Bonds (JNK-ETF) that I track, all were down on Friday.
On Fridays, I summarize a number of indicators to get a
weekly feel for trend. Overall, the end-of-week summary moved even more sharply
to the Bear side (18-bear and 3-bull). These indicators (totaling 38 today)
tend to be both long-term and short-term, so they are different than the 20
that I report on daily. Details follow:
BULL SIGNS
-Bollinger Bands.
-RSI.
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500.
NEUTRAL
-There has been 1 Distribution Day since the last
Follow-Thru Day on 19 April.
-There have been 4 Statistically-Significant days (big
moves in price-volume) in the last 15-days.
-The S&P 500 is 5% below its 200-dMA (Bear indicator
is 12% above the 200-day.). This value was 15.9% above the 200-dMA when the 10%
correction occurred in Sep 2020. (Bigger bottoms are formed when the Index is
at, or below, the 200-dMA.)
-Non-crash Sentiment indicator is neutral.
-Issues advancing on the NYSE (Breadth) compared to the
S&P 500 is neutral.
-Overbought/Oversold Index (Advance/Decline Ratio)
-Long-term new-high/new-low data is flat.
-There was a Hindenburg Omen signal 8 April – it was
canceled when the McClellan Oscillator turned bullish.
-Slope of the 40-dMA of New-highs is flat. This is one of
my favorite trend indicators.
-There have been 9 up-days over the last 20 sessions – neutral.
-There have been 3 up-days over the last 10 sessions – neutral.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-The Calm-before-the-Storm/Panic Indicator did not
indicate a bottom Friday.
-VIX has been falling, but not enough to give a signal
Friday.
-No 90% up or down days. I’ve seen a comment from a Pro
that the correction won’t end until the S&P 500 has a 90% down-volume day
-2.8% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 3 January. (There is no
bullish signal for this indicator.) This indicated that the advance was too
narrow and a correction was likely to be >10%. – It proved correct, but is
now Expired
-15 February, the 52-week, New-high/new-low ratio
improved by 4.2 standard deviations; Bullish, but the signal has expired.
BEAR SIGNS
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bearish crossover 21 April.
-The smoothed advancing volume on the NYSE is falling.
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is below 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50%.
-The 100-dMA % of issues advancing on the NYSE
(Breadth) is below 50%
-The 50-dMA % of issues advancing on the NYSE (Breadth)
has been below 50% for 91 consecutive days. (3 days in a row is my “correction-now”
signal)
-Smoothed Buying Pressure minus Selling Pressure is falling.
-MACD of S&P 500 price made a bearish crossover 7
April.
-My Money Trend indicator is headed down.
-Short-term new-high/new-low data is falling.
-The 1-day Fosback High-Low Logic Index was very bearish
on 21 April. That signal remains in place for 30-days.
-The 10-dEMA of the Fosback Hi-Low Logic Index was 3.5%
while 2.2% is considered the Bear sign for a short-term move.
-McClellan Oscillator is negative.
-The Smart Money (late-day action) is falling. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-The graph of the Count (the 100-day sum of up-days) dropped
again today to 44, indicating the trend remains clearly down. (I’ll need to
refine this indicator, possibly by using a rate-of-change analysis.) In any
event, the direction of the curve is very telling as we noted in the plot
yesterday.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions (by a lot). This remains troubling.
-Only 39% of the 15-ETFs that I track have been up over
the last 10-days.
On Friday, 21 February, 2 days after the top before the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 18 bear-signs and 3-Bull. Last week, there were 16 bear-signs and 6
bull-signs.
Today, the daily sum of 20 Indicators dropped from +8 to -2
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -24 to -19 (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 20 indicators are short-term so they tend to bounce
around a lot.
The Long Term NTSM indicator remained
HOLD: VOLUME is bearish; VIX, SENTIMENT & PRICE are hold.
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.
Sometimes these big down-days are at bottoms. Both RSI and Bollinger Bands were overbought
and that often signals a short-term bottom. I’d like to think today was a bottom, but it
did not meet my statistical test for a Panic Day and we also note that the
S&P 500 is now only about 2% above its prior correction-low. It looks like a retest of the prior, 8 March low
is more likely than a bounce now.
One item of concern.
If this test is successful and the S&P 500 rebounds to a new-high,
it would be a very unusual correction to have lasted so long with only a 13%
maximum drop from the top. I am concerned that this could mean that the
correction could go much lower to match up with previous long corrections – say
20%? This isn’t a prediction – just a worry.
Only time will tell...
It’s hard to be anything but a Bear now. Hopefully, it won’t last much longer and we
get a retest, followed by a big bounce higher next week.
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.
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
FRIDAY 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 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.
