“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.
FOMC MEETING (YahooFinance)
“The Federal Reserve on Wednesday raised interest rates
by 0.75%, the largest move it has made in a single meeting since 1994.
The central bank messaged that further interest rate
hikes will come this year, as the Fed leans on higher borrowing costs to dampen
demand and work to slow faster-than-expected
inflation.” Story at...
https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-june-2022-120337242.html
RETAIL SALES (YahooFinance)
“U.S. retail sales registered a bigger-than-expected drop
in May as motor vehicle sales plunged and record gasoline prices prompted
households to cut back spending on other items. The Commerce
Department said Wednesday that retail sales fell 0.3% last
month, down sharply from April's downwardly revised 0.7% increase...” Story
at...
https://finance.yahoo.com/news/may-retail-sales-data-june-15-2022-123734719.html
EMPIRE STATE MANUFACTURING (fxStreet)
“The headline General Business Conditions Index of the NY
Fed's Empire State Manufacturing Survey slumped to -11.60 in May from 24.60 in
April. That was much larger than the expected drop to 17.00 and marked the
largest miss on expectations since April 2020, when the pandemic first struck
the US.” Story at...
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 2.0 million barrels from the
previous week. At 418.7 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
The increase in inventories suggests a drop in demand.
EXXON MOBIL RESPONSE TO BIDEN LETTER DEMANDING MORE
REFINING (Business Wire)
“Specific to refining capacity in the U.S., we’ve been
investing through the downturn to increase refining capacity to process U.S.
light crude by about 250,000 barrels per day – the equivalent of adding a new
medium-sized refinery. We kept investing even during the pandemic, when we lost
more than $20 billion and had to borrow more than $30 billion to maintain
investment to increase capacity to be ready for post-pandemic demand.
In the short term, the U.S. government could enact
measures often used in emergencies following hurricanes or other supply
disruptions -- such as waivers of Jones Act provisions and some fuel
specifications to increase supplies. Longer term, government can promote
investment through clear and consistent policy that supports U.S. resource
development, such as regular and predictable lease sales, as well as
streamlined regulatory approval and support for infrastructure such as
pipelines [my underlining].” Full response at...
My cmt: The administration prefers to jawbone and point
fingers rather than follow the advice of Exxon-Mobil – all of which would have
a positive effect on energy prices in both the short and long term. Regular
readers know that I have written extensively about the absurd policy of
cancelling pipelines in order to use trucks and rail transportation that is
less safe; costs more and uses diesel fuels.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 1.5% to 3790.
-VIX fell about 9% to 29.62.
-The yield on the 10-year Treasury slipped to 3.289%
PULLBACK DATA:
-Drop from Top: 21% as of today. 22.1% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 113-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 14.4% BELOW its 200-dMA & 8.7%
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.
MY TRADING POSITIONS:
XLE
*XLE was one of the few losers today, down over 2% while tech was up over 2%. I’ll take profits if there is weakness tomorrow. I can always buy it back later if the energy trade improves.
TODAY’S COMMENT:
As the chart below shows, the FED announcement at 2PM was
met with a lot of indecision followed by buying and more indecision. FED Chair
Powell said their policies will be “flexible and sensible depending on incoming
data.” That doesn’t guarantee it will work.
We were due for a bounce and it looks like it started today. Whether it will last a couple of days, or longer, I don’t know. It is too short a term for me to call. One short-term indicator I follow is the 5-day Hi/Lo Logic Index. The indicator is based on the smaller number of new-high and new-lows. With new lows now at very low values, it is calling for a short-term move higher.
My general feeling is that the longer a down-turn lasts,
the shorter the bounces last. There haven’t been that many major crashes in my
investing lifetime and I haven’t done much research on the subject, but since I
just got burned on a counter-trend rally that failed (with 2 rare & excellent
bull-signals), I am not inclined to try and play this potential rally.
I plan to go short if there is a statistically
significant up-day signaling an end to a rally (if we do indeed have one). I’ll
use ProShares Short S&P500 (SH). It is a non-leveraged short position that
I would feel comfortable holding for a longer period. Yesterday, the chart
suggested a low at least in the 3300-3500 range.
Today, the daily sum of 20 Indicators slipped from -5 to
-6 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations dropped from +68 to +53. (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 remained SELL: PRICE and SENTIMENT are neutral; VOLUME and
VIX are bearish.
I’m a Bear, but I expect a bounce of some kind soon.
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
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 35% invested in stocks.
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.
