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“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
PAYROLL REPORT (YahooFinance)
“The U.S. labor market remained red-hot in July...Here were the key numbers from the report, compared to economist estimates compiled by Bloomberg:
-Non-farm payrolls: +528,000 vs. +250,000
-Unemployment rate: 3.5% vs. 3.6%
-Average hourly earnings, month-over-month: +0.5% vs. +0.4%
-Average hourly earnings, year-over-year: +5.2% vs. +4.9%
... this jobs report is consistent with an inflationary boom," Dutta [Head of U.S. Economics at Renaissance Macro Research] added. "The Fed has a lot more work to do and in an odd way, that the Fed needs to get more aggressive in pushing up rates, makes the hard-landing scenario more likely." Story at...
https://finance.yahoo.com/news/july-jobs-report-august-5-2022-123238307.html
 
EARNINGS (FACTSET)
“-Earnings Scorecard: For Q2 2022 (with 87% S&P 500 companies reporting actual results), 75% of S&P 500 companies have reported a positive EPS surprise and 70% of S&P 500 companies have reported a positive revenue surprise.
-For Q2 2022, the blended earnings growth rate for the S&P 500 is 6.7%. If 6.7% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%). 
-Earnings Guidance: For Q3 2022, 42 S&P 500 companies have issued negative EPS guidance and 30 S&P 500 company has issued positive EPS guidance.
-Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.5. This P/E ratio is below the 5-year average (18.6) but above the 10-year average (17.0).” FactSet Earnings Insight Report at...
https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_080522A.pdf
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 slipped about 0.2% to 4145.
-VIX bucked the trend again and dipped about 1% to 21.15.
-The yield on the 10-year Treasury rose to 2.834%.
 
PULLBACK DATA:
-Drop from Top: 13.6% as of today. 23.6% max.
-Trading Days since Top: 148-days.
The S&P 500 is 4.4% Below its 200-dMA & closed 5.2% Above its 50-dMA. It also closed above its 100-dMA again.
-Resistance points for the rally, are: (1) 4175, the June highs; (2) 4240, the 50% retracement point (top to bottom); (3) 4342, the 200-dMA; (4) or 4370, the 62% Fibonacci retracement point for those who believe in that sort of thing.
 
*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 took profits in SSO. I sold it since the market doesn’t feel right to me.  New-highs are still below New-lows. That bothers me and is a worrisome sign for the rally. The Sum of daily indicators peaked and is falling; my Money Trend indicator is falling. Those are additional signs the rally may be over. It is dangerous to hold leveraged ETFs too long.
 
TODAY’S COMMENT:
On Fridays, I summarize a number of indicators to get a weekly feel for trend. Bull signs dropped some, but overall, not much change from last week – indicators remain to the Bull side (5-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
-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%
-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.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is Bullish.
-Short-term new-high/new-low data.
-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 size of up-moves has been larger than the size of down-moves over the last month.
-The smoothed advancing volume on the NYSE is rising.
-Cyclical Industrials (XLI-ETF) are out-performing the S&P 500.
-62% of the 15-ETFs that I track have been up over the last 10-days.
 
NEUTRAL
-Sentiment.
-Buying Pressure minus Selling Pressure is flat.
-Bollinger Bands.
-The short-term, 10-day, Fosback Hi-Low Logic Index.
-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 Distribution Day 2 August.
-RSI
-VIX.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-There have been 2 Statistically-Significant day (big moves in price-volume) in the last 15-days.
-The S&P 500 is 5.4% below its 200-dMA. (Bull indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-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 9 up-days over the last 20 sessions –neutral.
-There have been 5 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.
- S&P 500 is outperforming the Utilities (XLU), but not by much, so I’ll call it neutral.
 
BEAR SIGNS
-My Money Trend indicator.
-Long-term new-high/new-low data.
-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 headed 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 5 bear-signs and 14-Bull. Last week, there were 6 bear-signs and 18 bull-signs.
 
The S&P 500 did remain above the 200-dMA again. This suggests more up moves are possible.
 
Today, the daily sum of 20 Indicators improved from +6 to +7 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from +89 to +87. (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 & VOLUME are bullish; SENTIMENT & VIX are neutral. I still expect the S&P 500 to test its prior low of 3667. Remember for the longer-term, one indicator trumps them all – “Don’t fight the FED.”
 
I’m a Bear longer-term; short-term, the bulls took back control of the markets, but I am concerned the rally may not continue. 
 
The markets may be one piece of bad news from a market rout. I don’t know what that news may be, but it wouldn’t take much to kill the rally.
 
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 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 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.