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“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“The stock market, in its entirety, is still too high, so we have to let the averages come in before putting more money to work.” – Jim Cramer, CNBC Host (7/27/2022)
 
“When the Fed gets out of the way, you have a real window and you’ve got to jump through it. … When a recession comes, the Fed has the good sense to stop raising rates, I think that window has finally arrived, and you don’t want to close it on yourself.” – Jim Cramer, CNBC Host (7/28/2022)
 
PERSONAL SPENDING / PERSONAL INCOME (WSJ)
“U.S. households’ spending rose more rapidly last month as annual inflation hit a new four-decade high, outpacing income growth. Consumers boosted their seasonally adjusted spending by 1.1% in June... Personal income rose by 0.6% last month, the same as the prior month. After taxes and adjusting for inflation, incomes fell by 0.3%.” Story at...
https://www.wsj.com/articles/inflation-consumer-spending-personal-income-june-2022-11659059583
 
PCE PRICES (CNN)
“Another key measure of inflation set a fresh 40-year high in June, a month marked by record-high gas prices. The Personal Consumption Expenditures price index, which measures the change in the prices of goods and services purchased by consumers, rose by 6.8% in June as compared to the same period last year...core PCE – the inflation index closely watched by the Federal Reserve – increased by 4.8% from one year ago, up slightly from May but down from a high of 5.3% in February.” Story at...
https://www.cnn.com/2022/07/29/economy/pce-inflation-june-fed/index.html
 
EMPLOYMENT COST INDEX (ShareCast)
“A broad measure of workers' compensation increased modestly more quickly than anticipated over the three months to June. According to the US Department of Labor, the Employment Cost Index advanced at a quarter-on-quarter clip of 1.3% during the second quarter.” Story at
https://www.sharecast.com/news/international-economic/us-q2-employment-cost-index-rises-a-bit-more-quickly-than-anticipated--10260141.html
 
CHICAGO PMI (MarketWatch)
“The Chicago Business Barometer, also known as the Chicago PMI, fell to 52.1in July from 56 in the prior month. It is the lowest reading since August 2020. Economists polled by the Econoday forecast a steady 56 reading.”  Story at...
https://www.marketwatch.com/story/chicago-pmi-continues-to-soften-in-july-falls-to-lowest-level-in-almost-two-years-11659102951
 
UNIV OF MICHIGAN SENTIMENT-FINAL (Univ of Michigan)
“Consumer sentiment was essentially unchanged from June, when it had reached an all-time low for the survey, according to the University of Michigan Surveys of Consumers. Most components of the index were little changed, though buying conditions for durables adjusted upwards, primarily due to perceptions of easing supply constraints. Still, buying conditions for durables remained 28% lower than July 2021, according to U-M economist Joanne Hsu, director of the surveys.” Story at...
https://news.umich.edu/consumers-adjust-to-inflation-as-labor-market-expectations-worsen/
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.4% to 4130.
-VIX dipped about 4% to 21.33.
-The yield on the 10-year Treasury slipped to 2.651%.
 
PULLBACK DATA:
-Drop from Top: 13.9% as of today. 23.6% max.
-Trading Days since Top: 143-days.
The S&P 500 is 5% Below its 200-dMA & closed 5.3% Above its 50-dMA. It also closed above its 100-dMA Friday.
 
*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 a position in SSO today, cancelling my short (without selling it) and adding to the stock side of the portfolio with a short-term holding.
 
TODAY’S COMMENT:
On Fridays, I summarize a number of indicators to get a weekly feel for trend. Not much change from last week – indicators remain to the Bull side (6-bear and 18-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
-The 10-dMA % of issues advancing on the NYSE (Breadth) is above 50%.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50.
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%
-Sentiment.
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bullish crossover 24 June.
-MACD of S&P 500 price made a bullish crossover 24 June.
-Short-term new-high/new-low data.
-My Money Trend indicator.
-VIX.
-The size of up-moves has been larger than the size of down-moves over the last month.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is Bullish.
-McClellan Oscillator is positive.
-The graph of the 100-day Count (the 100-day sum of up-days) is headed up.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are both ABOVE the 20-dEMA.
-The smoothed advancing volume on the NYSE is rising.
-Cyclical Industrials (XLI-ETF) are out-performing the S&P 500. ?????
-67% of the 15-ETFs that I track have been up over the last 10-days – this is starting to look overdone.
- S&P 500 is outperforming the Utilities (XLU), but not by much.
 
NEUTRAL
-The short-term, 5-day & 10-day, Fosback Hi-Low Logic Indexes.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) popped above 50% ending its streak of consecutive days. (3 days in a row is my “correction-now” signal)
-There was a Follow-thru Day 27 July that canceled all Distribution Days in the last 5 weeks.
-There have been 3 Statistically-Significant day (big moves in price-volume) in the last 15-days.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The S&P 500 is 5% below its 200-dMA. (Bull indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-RSI
-There was an Inverse Zweig Breadth Collapse (negative Breadth Thrust) 21 June. That’s a rare, very-bearish sign, but it was 4-weeks ago.
-The 52-week, New-high/new-low ratio improved by 0.7 standard deviations on 15 July – too small to send a signal.
-There was a Hindenburg Omen signal 8 April – it was canceled when the McClellan Oscillator turned bullish.
-The Calm-before-the-Storm/Panic Indicator.
-1 July was a Bullish Outside Reversal Day – expired.
-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
-There have been 12 up-days over the last 20 sessions –neutral.
-There have been 7 up-days over the last 10 sessions – neutral.
-There were three 90% Down-volume days 9-16June. There was a high up-volume day 19 July, but it was too long after the down-days to signal a reversal.
 
BEAR SIGNS
-Long-term new-high/new-low data.
-Buying Pressure minus Selling Pressure ticked down again today.
-Bollinger Bands are bearish.
-Slope of the 40-dMA of New-highs is down. This is one of my favorite trend indicators.
-The Smart Money (late-day action) is turning down.
-Overbought/Oversold Index (Advance/Decline Ratio).  
 
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 6 bear-signs and 18-Bull. Last week, there were 5 bear-signs and 17 bull-signs.
 
Earnings reports were poor this week, but not as bad as had been feared, so markets responded positively. We note that breadth (as indicated in the chart below) is breaking trend. This is the first time the 100-dMA of % of stocks advancing has been above 50% since very early in the correction.

Not only did the %-of Advancing issues pop above its 100-dMA, the S&P 500 climbed above its 100-dMA. This has been a very bullish move off the bottom. The S&P 500 broke above the short-term trend line (black in the chart). Now, I think it may be able to make it to the longer-term trend-line shown in green. That is very close to the 200-dMA. At present, the S&P 500 is near the June highs and we would expect to see the rally slow down at this resistance point, especially since we’ve seen 3 up-days in a row.
 
Today, the daily sum of 20 Indicators remained +10 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations improved from +82 to +97. (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.
 
The rally broke above the 100-dMA Friday (4122) and it is not impossible for the Index to reach the 200-dMA. This still looks like a rally in a bear market. I think 4300 is a good target for the top of the rally, somewhat below the 200-dMA.
 
LONG-TERM INDICATOR: The Long Term NTSM indicator remained BUY: PRICE, SENTIMENT, VIX & VOLUME are bullish. I still expect the S&P 500 to test its prior low of 3667, but it may be possible to trade this market now, but remember for the longer-term, one indicator trumps them all – “Don’t fight the FED.” I am not convinced that the FED will pivot soon.
 
I’m a Bear longer-term; short-term the bulls remain in charge. FOMO (fear of missing out) is still not done. I added a long position in SSO to counter my small short position.
 
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)

*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)

My basket of Market Internals remained 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 now roughly 40% 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.