“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.
BRAINARD SHOULD RESIGN (Heritage Capital)
“[Wednesday] I wrote about the little
pullback in stocks. That was before Fed head Lael Brainard threw a
big bucket of cold water on the markets...one of my main themes for 2022 was
economic slowdown but not recession, again, similar to 1994 and 2018. I am
standing by that. Of late, you can see that in a number of equity sectors.
However, three of my key sectors, banks, transport and semis are not behaving
well at all right now. Couple that with high yield bonds lagging and there are
reasons for concern. Again, 2022 is a challenging year that requires patience
and quality. Both bulls and bears will be frustrated and that should lead to an
explosive move higher to 40,000 in 2023, assuming no recession.” – Paul Schatz
President of Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/7465/
EXPECT MORE VOLATILITY (The Felder report)
“The Fed minutes...reveal the central bank intends to
start reducing its balance sheet by as much as $95 billion per month beginning
in May. Investors ought to pay very close attention to this development
because, for a very long time now, the Fed has effectively used its asset
purchase program to suppress volatility across a variety of markets including
the equity market.” Commentary at...
https://thefelderreport.com/2022/04/06/the-fed-just-disengaged-its-volatility-suppression-machine/
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dipped about 0.3% to 4488.
-VIX slipped about 2% to 21.16. (Maybe the Options Crowd
thinks the dip is over.)
-The yield on the 10-year Treasury rose to 2.659%.
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:
If the correction has not ended:
Days since top: 67 (Avg= 60 days top to bottom for
>10% non-crash pullbacks)
Drop from Top: Now 6.4%. Max at close: 13%
The S&P 500 is 0.1% BELOW its 200-dMA & 1.4%
ABOVE its 50-dMA.
TODAY’S COMMENT:
On Fridays, I summarize a number of indicators to get a
weekly feel for trend. Overall, the Friday summary reversed sharply to the Bear
side (14-bear and 6-bull). These indicators (totaling 37 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
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 29 March.
-Smoothed Buying Pressure minus Selling Pressure is headed
up.
-Slope of the 40-dMA of New-highs is up. This is one of
my favorite trend indicators.
-There have been only 46 up-days in the last 100 sessions.
That’s a bullish sign unless this really is a bear market. We might expect this number to fall further in
a bear market.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA
are both ABOVE the 20-dEMA.
NEUTRAL
-There have been 3 Distribution Days since the last
Follow-Thru Day.
-There has been 1 Statistically-Significant days (big
moves in price-volume) in the last 15-days.
-The S&P 500 is 0.1% 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.
-Bollinger Bands are neutral.
-RSI.
-Overbought/Oversold Index (Advance/Decline Ratio)
- Issues advancing on the NYSE (Breadth) vs the S&P
500 is neutral.
-The Smart Money (late-day action) is flat. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-There have been 12 up-days over the last 20 sessions –
neutral.
-There have been 5 up-days over the last 10 sessions–
leaning bullish, but neutral.
-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.
-The Calm-before-the-Storm/Panic Indicator.
-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.
-VIX has been rising, but not enough to give a signal.
-Long-term new-high/new-low data is flat.
BEAR SIGNS
-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 82 consecutive days. (3 days in a row is my bear signal)
-There was a Hindenburg Omen signal today, 8 April.**
-The Fosback High-Low Logic Index is calling for a “sharp
drop”.**
-**McClellan Oscillator. The Oscillator is close to being
positive. If it turns positive next week, that would cancel both the Hindenburg
omen and the Fosback High-Low Logic Index warning. That lessens the impact of
the above 2 bear signs.
-MACD of S&P 500 price made a bearish crossover 7
April.
-My Money Trend indicator is headed down, but the rate of
fall is slowing dramatically.
-Cyclical Industrials (XLI-ETF) are underperforming the
S&P 500.
-Short-term new-high/new-low data is falling.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions. This is troubling.
-47% 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 14 bear-signs and 6-Bull. Last week, there were 6 bear-signs and 14
bull-signs.
Today, the daily sum of 20 Indicators improved from -7 to
-5 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations declined from +46 to 28 (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
ensemble remained HOLD: PRICE is Bullish; VOLUME, VIX & SENTIMENT are hold.
We can’t feel confident with the
Friday indicator-summary reversing to the Bear side. Notably, the Fosback
High-Low Logic Index is now calling for a “sharp drop”. There was also a
Hindenburg Omen, however, that indicator is more reliable when there are a
cluster of Omens.
On the good side, there were
more new-highs Friday and fewer new-lows than we’ve seen over the last 2 days. That trend could send the Fosback Logic Index
back to neutral. Unfortunately, the
McClellan Oscillator has declined over the last three days. It is driven by advance-declines which did
not improve recently. If we don’t see improvement
in breadth (adv-decline) and new-high, new-lows on Monday and Tuesday, I will
be forced to shift to a more defensive position.
I am a cautious Bull, but if market internals don’t improve
soon, I’ll be a Bear.
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.
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.
