“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.
NEW HOME SALES / CONSUMER CONFIDENCE (Reuters)
“Sales of new U.S. single-family homes unexpectedly rose
in May, but the rebound is likely to be temporary as home prices continue to
increase and the average contract rate on a 30-year fixed-rate mortgage
approaches 6%, reducing affordability... There was, however, some encouraging
news on the inflation front. While a survey from the University of Michigan on
Friday confirmed consumer confidence plunged to a record low in June,
consumers' inflation expectations moderated a bit.
https://www.reuters.com/business/us-new-home-sales-unexpectedly-rise-may-2022-06-24/
Maybe that slight bit of inflation good news set off
today’s rally?
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 3.1% to 3912.
-VIX fell about 6% to 27.23.
-The yield on the 10-year Treasury rose to 3.136%.
PULLBACK DATA:
-Drop from Top: 18.4% as of today. 23.6% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 119-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 11.2% BELOW its 200-dMA & 3.8%
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:
None
TODAY’S COMMENT:
Blast off! To infinity and beyond!! Volume was extremely
high today, nearly 70% higher than the average volume for the month and about
2% higher than the maximum volume during this entire 6-month downturn. The
previous record high volume was 18 March and it was also on an up-day. We have
not seen a super high volume down-day and that’s one reason we can’t call the
correction over. There hasn’t been a big
panic, flush-out day.
Today, there was high unchanged-volume. Many believe that
this indicator suggests investor confusion at market turning points. Recent
history shows this indicator has indicated a reversal of some kind, either now,
or near future. My problem is that it is frequently a false signal. At this
point if the indicator is sending a decent signal, the direction of reversal
would be down. It could be sending a false signal. Since all volume was high,
the unchanged component may be high too.
On Fridays, I summarize a number of indicators to get a
weekly feel for trend. Overall, the end-of-week summary improved, but there are
still a lot of bear-signs (9-bear and 14-bull). These indicators 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
-There was a Follow-thru day today and that cancels prior
Distribution Days.
-Issues advancing on the NYSE (Breadth) compared to the
S&P 500 are Bullish.
-Sentiment.
-MACD of S&P 500 price made a bullish crossover 24
June.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 24 June.
-The smoothed advancing volume on the NYSE is rising.
-Buying Pressure minus Selling Pressure is headed
up.
-My Money Trend indicator is rising.
-The short-term, 5-day & 10-day, Fosback Hi-Low Logic
Indeces are Bullish.
-McClellan Oscillator is positive.
-The graph of the 100-day Count (the 100-day sum of up-days)
was 48; the chart trend is sharply up.
-The Smart Money (late-day action) reversed higher.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-VIX is falling sharply.
NEUTRAL
-Short-term new-high/new-low data.
-Long-term new-high/new-low data.
-Bollinger Bands.
-Overbought/Oversold Index (Advance/Decline Ratio).
-The S&P 500 is 11.2% below its 200-dMA. (Bull
indicator is 12% below the 200-day.)
-There have been 10 up-days over the last 20 sessions –
neutral.
-There have been 5 up-days over the last 10 sessions –
neutral.
-RSI.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is
Neutral, but close to Bullish.
-There was a Breadth Thrust 2 June. That’s a rare bullish
sign. - Expired
-The 52-week, New-high/new-low ratio improved by 0.2
standard deviations on 24 June. – too small to send a signal..
-13 May was a Bullish Outside Reversal Day - expired.
-There was a Hindenburg Omen signal 8 April – it was
canceled when the McClellan Oscillator turned bullish.
-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
-Slope of the 40-dMA of New-highs is flat. This is one of
my favorite trend indicators.
-Utilities (XLU) are outperforming the S&P 500, but
divergence is small so let’s call this neutral.
BEAR SIGNS
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is below 50%.
-The 50-dMA percentage of issues advancing on the NYSE
(Breadth) is below 50.
-The 100-dMA percentage of issues advancing on
the NYSE (Breadth) is below 50%
-The 50-dMA percentage of issues advancing on the NYSE
(Breadth) has been below 50% for more than 100 consecutive days. (3 days in a
row is my “correction-now” signal)
-There have been 5 Statistically-Significant day (big
moves in price-volume) in the last 15-days. The last one was up, so this is
bearish.
-There were three 90% Down-volume days 9-16June. These remain
until cancelled by high up-volume days.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-43% 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 9 bear-signs and 14-Bull. Last week, there were 17 bear-signs and 8
bull-signs.
Today, the daily sum of 20 Indicators improved from -4 to
+9 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from -22 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 INDICATOR: The Long
Term NTSM indicator switched to BUY: SENTIMENT, PRICE & VIX are bullish; VOLUME
is neutral. This may indicate that the rally may be larger than I expected.
I wrote previously that I would short the S&P 500 if
there was another big (statistically significant) up-day. They often signal a
reversal, but there were so many bull signs today, I suspect the markets can go
higher. The upper trend line on the 3-month chart is about at the 50-dMA. The
S&P 500 should be able to get there.
That would be approximately another 4% gain from today’s close.
I’m a Bear, longer-term. This bear-market isn’t over yet.
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
All of the ETFs I track are
below their 120-dMAs, so my chart methodology is not valid. Top three ETF
ranking follows:
(1) XLV (2) XLU
(3) IBB
*For additional background on
the ETF ranking system see NTSM Page at…
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 roughly 30% 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.
