“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.
OIL STOCKS PLUMMET (OilPrice.com)
“Oil stocks are tanking amid a broader market selloff, as
Wall Street responds to stubbornly high inflation that is expected to lead to
more Federal Reserve policy tightening. With a New York Fed survey
showing longer-term inflation expectations that indicate potential weaker
growth and recession, Wall Street is showing less appetite for risk, while oil
prices have shed nearly 6% today on concerns of China’s COVID lockdowns.” Story
at...
https://oilprice.com/Latest-Energy-News/World-News/Oil-Stocks-Plummet-As-Broader-Markets-Tanks.html
BASED ON PAST HISTORY WHERE DOES THE DOWNTURN END?
(MSN.COM)
“Looking at a history of 19 bear markets over the past
140 years, they found the average price decline was 37.3% and the average
duration about 289 days. While “past performance is no guide to future
performance,” Hartnett and the team [at Bank of America] say the current bear
market would end Oct. 19 of this year, with the S&P 500 at 3,000 and the
Nasdaq Composite at 10,000.” Story at...
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 3.2% to 3991.
-VIX jumped about 15% to 34.75.
-The yield on the 10-year Treasury dropped to 3.040%.
PULLBACK DATA:
-Drop from Top: 16.8% as of today. 16.8% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 87-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 11% BELOW its 200-dMA & 8.5% 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:
Energy fell more than 8% today. Looks like the markets
figured out that a recession will hurt oil stocks too! The value of the dollar
didn’t help either. I am still in the XLE-ETF.
I’ll reconsider the position, but it may still be a good play given that
the EU plans to cut oil purchases from Russia in the coming months. That will drive oil prices even higher so it’s
possible that Energy will do well even if recession fears increase. Part of
what is happening now is tossing the baby out with the bath water. That tends to happen near lows as investors
panic and sell everything. Unfortunately, NYSE volumes don’t yet seem to be
high enough to suggest panic. It is getting closer, but Monday’s NYSE volume
was still about 20% below the volume at the panic low on 8 March 2022.
More than 90% of the volume was down-volume today. That’s
a bearish sign, but there is a catch. The close was too high to meet the
bearish test for the indicator established by Lowry Research. 90% down volume
is obviously not a bullish sign; but due to the higher close, today’s data is
not at a level that has been studied and shown to be a bearish sign. If today
(and last Thursday) had met the Lowry criterion for bearish, 90% down-volume
signals, we would conclude that more downside is coming and it may not turn
around until we see 90% of the volume reverse to the upside. That could take a while. Still, the signal
may be valid even though the numbers didn’t reach the Lowry test.
There were some bullish signs: (1) RSI is oversold (2)
Bollinger Bands are oversold (3) The Overbought/Oversold Index (advance decline
ratio) is oversold (4) My analysis of the late day action shows an oversold
condition. Still, oversold conditions can last for a while. I’ve seen at least
4 of these Bottom Signals in the last 2 weeks.
If this were a small correction, I’d say it was time to buy. Now? No, we
have more pain ahead.
Today, the daily sum of 20 Indicators declined from +2 to
-3 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from -20 to -17. (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 dropped to SELL: VIX & VOLUME are bearish; PRICE &
SENTIMENT are hold.
I heard a talking head on CNBC mention that you have to
own stocks now because inflation is devaluing cash due to inflation. Really? Inflation is running 7 to 8% a year, depending
on the measure one uses. The S&P 500 dropped 7% in the last three days!
The length of this correction could mean that it will go lower
to match up with previous long corrections – say 20%? This isn’t a prediction –
but it is looking a lot more realistic now.
There were 1063 issues on the NYSE that made new 52-week
lows today. Back in the Coronavirus 20% correction, there were 2375 new-lows about
a week and-a-half before the final bottom. If the correction keeps going, and
it shows no signs of letting up, it looks like the drop will be more than 20%.
To reiterate, no bottom yet.
I remain 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
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)
Usually, momentum aligns with
gains over a 2-month time frame. That’s not true now as investors are running
toward defensive stocks (Coke, Johnson and Johnson, McDonalds, etc.) during the
selloff.
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.
For more details, see NTSM
Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY MARKET INTERNALS (NYSE DATA)
My basket of Market Internals declined to SELL.
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 35% invested in stocks. This is 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.
