“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.
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer sentiment declined by 9.4% from April,
reversing gains realized that month. These declines were broad based--for
current economic conditions as well as consumer expectations, and visible
across income, age, education, geography, and political affiliation--continuing
the general downward trend in sentiment over the past year. Consumers'
assessment of their current financial situation relative to a year ago is at
its lowest reading since 2013...” Press release at...
RECESSION COMING? (msn.com)
"I think that we’re starting to see real
reasons to believe that maybe not here in 2022, but in 2023 we may
see a real recession," - Billionaire bond fund manager Jeffrey Gundlach
Billionaire
bond fund manager Jeffrey Gundlach warns of real recession in 2023 (msn.com)
MARKET REPORT / ANALYSIS
-Friday the S&P 500 jumped up about 2.4% to 4024.
-VIX dropped about 9% to 28.87.
-The yield on the 10-year Treasury rose to 2.918%.
PULLBACK DATA:
-Drop from Top: 16.1% as of today. 18.1% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 91-days. (Avg= 30 days top to
bottom for corrections <10%; 60 days top to bottom for larger, non-crash
pullbacks)
The S&P 500 is 10.1% BELOW its 200-dMA & 7.1%
BELOW its 50-dMA.
*We can’t be sure that the correction is over until the
S&P 500 makes a new-high; however, we hope to be able to call the bottom
when we see it.
TODAY’S COMMENT:
We saw some solid bottom signals today.
As of Thursday’s low, this leg of the downturn has lasted
31 days, not counting today. That’s a bit long. Paraphrasing a Jeffrey Saut comment,
we are in one of these “selling stampedes” that tend to last 17 – 25 sessions,
with only 1.5- to three-day pauses/throwback rallies, before they exhaust themselves
on the downside. The adage is that they end, but “Never on a Friday.” The
reference was that once the markets get into one of these weekly downside
skeins, they rarely bottom on a Friday. Nope, they typically give participants
over the weekend to brood about their losses and then they show up the next
Monday in “sell mode” leading to Turning Tuesday.”
Will this time be the rare occasion that the drop did end
on Friday? Maybe, but it appears to be a bounce in a Bear market, not a final
bottom.
On Fridays, I summarize a number of indicators to get a
weekly feel for trend. Overall, the end-of-week summary remained well to the
Bear side (12-bear and 9-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
-Friday was a Bullish Outside Reversal Day.
-The smoothed advancing volume on the NYSE is rising.
-Smoothed Buying Pressure minus Selling Pressure turned up
13 May.
-The Smart Money (late-day action) is rising. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-Issues advancing on the NYSE (Breadth) compared to the
S&P 500 was bullish Thursday. This
stays in effect for 4 days.
-The 10-dEMA of the Fosback Hi-Low Logic Index is bullish.
-There were 90% down-volume days 5 May and 9 May,
however, neither met all of the tests required for a Lowry Research
bearish-signal. Both closes were too high. This signal would be very bearish if
closes had been lower; but today there was a 90%-upside, volume-reversal. The
close today did meet all the tests for a Lowry 90% up-volume day. I think we
have to consider this short-term bullish.
-The graph of the Count (the 100-day sum of up-days) improved
to 46; the trend still looks flat to slightly up. Flat patterns happen at
bottoms so for now I’ll put this in a bullish category.
-There have been 6 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This tends to be bearish, but it
can be bullish too. Now, I’d say its
bullish since the S&P 500 is at its lower trend line.
NEUTRAL
-My Money Trend indicator is flat.
-Bollinger Bands.
-Overbought/Oversold Index (Advance/Decline Ratio) had
been oversold – now its neutral.
-RSI.
-There have been 2 Distribution Days since the last
Follow-Thru Day on 4 May.
-Non-crash Sentiment indicator is neutral.
-The S&P 500 is 10.1% 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.)
-There was a Hindenburg Omen signal 8 April – it was
canceled when the McClellan Oscillator turned bullish.
-There have been 10 up-days over the last 20 sessions –
neutral.
-There have been 5 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.
-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
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500, but the trend is down – I’ll put this the neutral category.
-51% of the 15-ETFs that I track have been up over the
last 10-days.
-VIX has been rising, but not enough to give a signal
Friday.
BEAR SIGNS
-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 101 consecutive days. (3 days in a row is my “correction-now”
signal)
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bearish crossover 12 May.
-MACD of S&P 500 price made a bearish crossover 7 April.
-Slope of the 40-dMA of New-highs is falling. This is one
of my favorite trend indicators.
-Short-term new-high/new-low data is falling.
-Long-term new-high/new-low data is falling.
-McClellan Oscillator is negative.
-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.
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 12 bear-signs and 9-Bull. Last week, there were 13 bear-signs and 4
bull-signs.
Forget all of the indicators. Today, there were 2 indicators that Trump the
others: (1) The 52-week, New-high/new-low ratio improved by 3.5 standard
deviations (2) There were 90% down-volume days 5 May and 9 May; today there was
a 90%-upside, volume-reversal. The close today did meet all the tests for a
Lowry 90% up-volume day. I think we have to consider this short-term bullish.
Because the 90% down-volume indicators were not as strong as they could have been,
it suggests that the selling was not as strong as it could have been either. I
suspect that we haven’t seen the worst of the selling.
In the meantime, this bounce should be a significant one
that aggressive investors may want to trade. A 50% retracement from the bottom is
possible and that would indicate a 9% gain to the 4280 area. Of course, a
bounce may be higher or lower. 50% is about
the normal retracement, but this isn’t a “normal” downturn so there are no
guarantees.
Today, the daily sum of 20 Indicators improved from zero
to +6 (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations improved from -8 to -2. (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.
LONG-TERM INDCATOR: The Long
Term NTSM indicator was HOLD: VOLUME is bearish; VIX, PRICE & SENTIMENT are
hold. 45 days out of the last 100 have
been up-days; that leans bullish.
I’m Bullish in the short-term and Bearish longer-term.
To conclude: Markets made a significant bottom today, but
it does not look like a durable bottom.
After a rally, I expect more selling and lower-lows ahead.
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
My only current trading
position is in the Energy XLE-ETF.
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.
