“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
According to the preliminary data compiled by the
National Law Enforcement Officers Memorial Fund (NLEOMF) as of December 31,
2021, 458 federal, state, tribal, and local law enforcement officers died in
the line of duty in 2021. This is the highest total line-of-duty officer deaths
since 1930 when there were 312 fatalities.
JOBLESS CLAIMS (CNBC)
“Initial filings for unemployment benefits totaled
235,000 for the week ended July 2, a gain of 4,000 from the previous period and
slightly more than the 230,000 Dow Jones estimate...Also on Thursday, job
placement firm Challenger, Gray & Christmas reported that planned layoffs
soared in June to 32,517, a 57% jump from a month ago and the highest total
since February 2021.” Story at...
CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 8.2 million barrels from the
previous week. At 423.8 million barrels, U.S. crude oil inventories are about
10% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
THE MOST IMPORTANT SIGN (Heritage Capital)
“The absolute key right now is that earnings season is
about to begin. Everyone on earth fully expects companies to reduce forward
guidance and issue murky forecasts. No secrets there. The rub comes IF stocks
rally in the face of the bad news. I am not saying they will, only that it will
be a very telling sign for performance over the coming weeks and months. Stay
tuned.” – Paul Schatz, President,
Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/taking-stock-as-q3-begins-the-single-most-important-sign/
CURIOUS BACKWARDATION BEHAVIOR IN OIL FUTURES (McClellan
Financial Publications)
“The crude oil futures market has been in a pretty severe
condition of “backwardation”, meaning that the price of the near month contract
is far above the prices of those contracts further out into the future...A
supply squeeze puts a premium on oil that can be delivered now...
...A more normal condition is to have farther out
contracts priced higher than the near month contract, and that is known as
“contango”. A large contango condition in the crude oil futures market is
a pretty good sign of an important price bottom.
Similarly, a large condition of backwardation is a sign
of a price top. And sure enough, the big backwardation condition we have
just been seeing recently in 2022 has now led to a big price drop, taking oil
prices back below $100/barrel. But it has come with a proportionate drop
throughout the maturity spectrum of oil futures, meaning that the far out
months are dropping almost as fast. That is resulting in oil maintaining
a pretty large condition of backwardation.
The implication is that there is going to be even more of
a decline in crude oil prices, because the near month price will need to
naturally contract back downward to meet where the far out month contracts are
priced, just to get back into equilibrium.” – Tom McClellan. Commentary
at...
My cmt: Tom didn’t say it, but this oil futures action
may be due to trader concerns about recession. The farther out futures price
for oil is dropping due to expected demand declines.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.5% to 3903.
-VIX dipped about 2.4% to 26.08.
-The yield on the 10-year Treasury rose to 3.002%.
PULLBACK DATA:
-Drop from Top: 18.6% as of today. 23.6% max.
-Days since Top: 127-days.
The S&P 500 is 10.9% BELOW its 200-dMA & 1.9%
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:
I see a lot of technical bullish indicators, but at the
same time, there is a lot of buying in defensive sectors of the stock market. That suggests that the current bounce is a
rally within a bear market.
I said last week that I thought the S&P 500 could
make it to its 50-dMA. The Index is now 1.9%
below its 50-dMA so that is still possible. The move today did not meet the test for a statistically-significant,
up-day, in my system. So the bounce may have more to go.
My Money Trend indicator is based on market internals and
price; it remains bullish. Buying-Pressure has been outpacing Selling-Pressure
recently and the chart is bullishly diverging from the Index. Both indicators
suggest the S&P 500 can go higher.
My guess is that the next leg down will be signaled by a
huge up-day as FOMO (fear of missing out) takes over.
Today, the daily sum of 20 Indicators declined from +2 to
+8 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from +50 to +60. (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 improved to BUY: SENTIMENT, VOLUME & VIX are bullish;
PRICE is Neutral. Although the LT Indicator is buy, I don't think its a great time to buy since I expect the markets to test prior lows and/or make new lows.
I’m a Bear, longer-term. In the short-term, I am in wait-and-see
mode. The question is, “How much longer can the rally go?” If the S&P 500 can
break above the 3980 region, it could make it all the way up to around 4200.
That would be about a 50% retracement and it also is close to the 100-dMA.
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) 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
THURSDAY 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.
