“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.
HOUSING STARTS / PERMITS (YahooFinance)
“U.S. housing starts fell in April, but remained at
historically high levels, despite growing signs that higher prices and rising
mortgage rates are hurting the affordability of home purchases...Single-family
housing starts fell 7.3% on the month and are now up only 3.7% on the year,
while starts for projects with more than five units were up 16.8% from March
and are now up 42.3% from April 2021...the Mortgage Bankers' Association
said mortgage applications fell by 11% last week, against a
backdrop of a surge in long-term interest rates.” Story at...
https://finance.yahoo.com/news/u-housing-starts-fell-april-085727939.html
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 420.8 million barrels, U.S. crude oil inventories are about
14% below the five-year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 4% to 3924.
-VIX jumped about 19% to 30.96.
-The yield on the 10-year Treasury slipped to 2.970%.
PULLBACK DATA:
-Drop from Top: 18.2% as of today. 18.2% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 94-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 12.3% BELOW its 200-dMA & 9.1%
BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500
makes a new-high; however, we hope to be able to call the bottom when we see
it...and... we did call the market a trading “Buy” one day after the recent
trading bottom on 12 May...
...Now, (Wednesday) I’m not feeling so smug, but I still
think we are at or very near a trading bottom.
MY TRADING POSITIONS:
QQQ*
UWM*
XLE
DOW
*Sell when the markets are overbought.
TODAY’S COMMENT:
Wow. I didn’t set stops on my UWM and QQQ positions –
rookie mistake! So, I am underwater on the trades for the counter-trend rally. Some
choppiness after a short-term bottom is expected, but a 4% one-day drop is not!
Investors were upset by Walmart and Target results.
Basically, sales were ok, but margins were hit by inflation. Walmart indicated
that they had too many employees and would cut the workforce. Apparently, more
employees returned to work than were expected after the latest Covid surge. Walmart fell another 7% today after a double-digit
drop yesterday. Target lost 25%...TODAY.
The good news, if there is any, is that today the market
tested its prior low on the S&P 500 and the results are not all bad. The S&P 500 made a new low today on much
lower volume with a mixed improvement in the internals. Overall, I think this
is constructive for a bounce higher although it may take a couple of days before
investors agree with me. The Index is also at its lower trend line for this
decline.
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.
Statistically-significant, down-days almost always coincide at bottoms
or close to bottoms, but (obviously) not all statistically-significant, down-days
occur at bottoms.
The 5-day Fosback Hi-Low Logic Index was “buy” yesterday
and would be again today except that the McClellan Oscillator is negative,
though not by much.
Today, the daily sum of 20 Indicators dropped from +9 to
-2 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations declined from +21 to +20. (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 INDICATOR: The Long
Term NTSM indicator was HOLD: VOLUME and VIX are bearish; PRICE is hold; SENTIMENT
is bullish. 44 days out of the last 100
have been up-days; that leans bullish. This indicator is nearly “sell”, but I don’t
think this is the time to sell.
It’s usually not a good idea
to make a move in a huge day since the next day is likely to be a move in the
opposite direction. Thursday should be up.
I am cautiously Bullish in the short-term and Bearish
longer-term. I expect a rally in the 7-9% range (reduced due to current
negativity) from Monday’s close, before the markets return to selling. Am I
right? We’ll see. The next day or two will be telling. Panic creates panic so I could be completely wrong this time.
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.
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.
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 roughly 45% invested in stocks, but some percentage includes
trading-positions. This is slightly below 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.
