“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
HOUSING STARTS / PERMITS (YahooFinance)
“A new Housing
Starts report for June is out this morning, with a new
cycle low set at 1.56 million seasonally adjusted, annualized units — down -2%
versus expectations of +1.4%. Building
Permits — seen as a forward indicator of future starts —
performed slightly better than anticipated to 1.69 million from 1.68 million
expected, down -0.6% from the previous month’s unrevised 1.70 million.” Story
at...
https://finance.yahoo.com/news/u-housing-starts-declined-june-145702743.html
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 jumped about 2.8% to 3831.
-VIX dropped about 3% to 24.50.
-The yield on the 10-year Treasury rose to 3.025%.
PULLBACK DATA:
-Drop from Top: 17.9% as of today. 23.6% max.
-Trading Days since Top: 135-days.
The S&P 500 is 9.7% BELOW its 200-dMA & 0.4% ABOVE
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:
SH, short the S&P 500 ETF.
I added more to my SH position 7/18.
TODAY’S COMMENT:
The S&P 500 broke above its 50-dMA today contributing
to the bullish mood. The Index has remained below its 50-day of a considerable
time and that only happens in major bear markets – think 200 or 2008. That is a
good sign for the bulls, but trends are still down. Notably, the 200-dMA is
still falling as it has for the last 2 months.
I did see some more Bull signs today:
My Money Trend indicator reversed upward 2 days ago and is
still headed up.
There was also a Bollinger Squeeze indicated today at the
close.
“A Bollinger Band®...is a tool used in technical
analysis. It is defined by a series of lines that are plotted two standard
deviations—both positively and negatively—away from the simple moving average (SMA)
of the price of a security...A Squeeze is triggered when volatility reaches a
six-month low and is identified when Bollinger Bands® reach a six-month minimum
distance apart...To determine breakout
direction, Bollinger suggests that it is necessary to look to other indicators.
He suggests using the relative strength index (RSI)
along with one or two volume-based indicators.” – Investopedia.
It looks like the breakout is more likely to be up, but
as is noted in the article, “Just like any other strategy, the Bollinger Squeeze
shouldn't be the be-all and end-all of your trading career. Remember, like
everything else in the investment world, it does have its limitations.” I’ll
wait and see how the Index breaks – up or down.
90% of today’s volume was up. That’s a good sign, but it has been too long
since the last 90% down day to call this a reversal signal.
On the Bear side, New-highs are still trending down. I
haven’t changed my opinion: this is not the end of the correction. On the other hand, the Bollinger Squeeze suggests
a big breakout, though the direction is not very clear. If it is up, this could be a tradable bounce.
Today was also a statistically significant up-day. That
just means that the price-volume move exceeded my statistical parameters.
Statistics show that a statistically-significant, up-day is followed by a
down-day about 60% of the time.
Statistically-significant, up-days almost always coincide with tops, but
not all statistically-significant, up-days occur at tops.
Oh, yeah - Don’t fight the Fed.
Today, the daily sum of 20 Indicators improved from +8 to
+13 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from +17 to +26. (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: PRICE, SENTIMENT, VOLUME & VIX are
bullish. I haven’t seen enough bottom signals to recommend buying now. I still
expect the S&P 500 to test its prior low of 3667, but it may be possible to
trade this market now.
I’m a Bear, but in the mean-time, the Bollinger Squeeze
suggests a big move is coming soon. If markets keep moving up, I will add XLK
as a short-term trade to counter my short position in SH. This would counter
the short hedge without having to sell the short position.
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
My chart methodology is looking
funky. Top four ETF ranking follows:
(1) IBB
(2) XLV (3) XLU (4) ITA These are conservative,
“investors-are-playing-defense,” leaders.
*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
TUESDAY MARKET INTERNALS (NYSE
DATA)
My basket of Market Internals improved to BUY.
(Market Internals are a decent trend-following
analysis of current market action, but should not be used alone for short term
trading. They are most useful when they diverge from the Index.)
My stock-allocation in the
portfolio is 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.
