“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.
ISM MANUFACTURING INDEX (RTT News)
“The Institute for Supply Management released a report on
Friday showing its reading on U.S. manufacturing activity fell to its lowest
level in two years in the month of June. The ISM said its manufacturing PMI
slid to 53.0 in June from 56.1 in May, although a reading above 50 still
indicates growth in the sector.” Story at...
https://www.rttnews.com/3294245/u-s-manufacturing-index-drops-to-two-year-low-in-june.aspx
CONSTRUCTION SPENDING (National Mortgage Professional)
“Construction spending in May slipped 0.1% from a month
earlier, the first decline since September 2021... The May estimate is still
9.7% above the estimate of $1.623 trillion for May 2021.”
https://nationalmortgageprofessional.com/news/construction-spending-dips-01-may-1st-decline-8-months
GOOD RIDDDANCE JULY (Heritage Capital)
“While the stock market has seen a good number of solid
lows formed, the rallies have been more successively short-lived and ending
much sooner and with lower magnitude than expected. As I mentioned before, that
kind of behavior is more indicative of a bear market than using some silly and
arbitrary price threshold like 20%...
...I saw some July 4th travel tweets that showed airfares
are up 45% from three years ago and rental cars are up by 75%. And we all know
about gas prices. Yet consumers look to travel in record numbers this
weekend...I feel like this is the last hoorah for consumers before they begin
to tighten their belts in Q3 and Q4. So far, Americans have been using savings
and the rest of COVID relief funds.” – Paul Schatz, President Heritage Capital.
Commentary at...
https://investfortomorrow.com/blog/overusing-good-riddance-inflation-of-july-4th-travel/
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.1% to 3825.
-VIX fell about 7% to 26.70.
-The yield on the 10-year Treasury fell to 2.894%.
PULLBACK DATA:
-Drop from Top: 20.2% as of today. 23.6% max.
-Days since Top: 124-days.
The S&P 500 is 12.9% BELOW its 200-dMA & 4.5%
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. The expected bounce lost momentum.
TODAY’S COMMENT:
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, I’m not sure what it
means. The trend has been loose recently.
Looking at Breadth, 56% of issues on the NYSE have been up over the last
10-days (and the overbought-oversold ratio is overbought). I’d have to say that
today’s unchanged-volume is suggesting a reversal down, but I don’t have a
great deal of confidence in the call.
On Fridays, I summarize a number of indicators to get a
weekly feel for trend. Overall, the end-of-week summary improved to a roughly
neutral position (12-bear and 11-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
-Issues advancing on the NYSE (Breadth) compared to the
S&P 500 are Bullish.
-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.
-My Money Trend indicator is rising.
-Short-term new-high/new-low data.
-The short-term, 5-day & 10-day, Fosback Hi-Low Logic
Indeces are Bullish.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is
Bullish.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-The S&P 500 is 12.9% below its 200-dMA. (Bull
indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-McClellan Oscillator is positive.
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is above 50%.
NEUTRAL
-There have been 8 up-days over the last 20 sessions – leaning
bullish, but neutral.
-There have been 5 up-days over the last 10 sessions –
neutral.
-There have been 4 Statistically-Significant day (big
moves in price-volume) in the last 15-days.
-Bollinger Bands.
-RSI.
-Sentiment.
-VIX.
-Slope of the 40-dMA of New-highs is flat. This is one of
my favorite trend indicators.
-Long-term new-high/new-low data.
-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
-The graph of the 100-day Count (the 100-day sum of up-days)
is sharply down, but it turned up today. – Let’s call it neutral until we see more
improvement.
-The Smart Money (late-day action) is mixed.
-53% of the 15-ETFs that I track have been up over the
last 10-days.
BEAR SIGNS
-Overbought/Oversold Index (Advance/Decline Ratio).
-There was a Distribution Day, 30 June.
-There was an Inverse Zweig Breadth Collapse (negative
Breadth Thrust) 21 June. That’s a rare, very-bearish sign.
-The smoothed advancing volume on the NYSE is falling.
-Buying Pressure minus Selling Pressure is falling.
-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 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.
-Utilities (XLU) are outperforming the S&P 500.
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 11-Bull. Last week, there were 17 bear-signs and 8
bull-signs.
Today, the daily sum of 20 Indicators improved from +4 to
+7 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from +35 to +43. (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 BUY: VOLUME & PRICE are bullish; SENTIMENT &
VIX are Neutral. I don’t consider this a good time to be a buyer. Markets
have still not bottomed, and if we do have a recession, markets are likely to
fall a lot more.
I’m a Bear, longer-term. In the short-term, I think we’ll
be headed down next week, but I don’t have a lot of conviction on the call. I
am tempted to short the S&P 500 again – we’ll see.
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 four ETF
ranking follows:
(1) XLU
(2) XLV (3) IBB (4) XLE
*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.
For more details, see NTSM Page at…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.
