DOW Stock Momentum ... ETF Momentum … Stock Market Analysis ... Earnings Decline ... Some Measures of Sentiment are already too Bullish ...
“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The House passed a sweeping tax, health and climate bill
on Friday, delivering a major win for Democrats and President Joe Biden less than
three months before the pivotal midterm elections.” Story at...
https://www.cnbc.com/2022/08/12/house-to-vote-on-inflation-reduction-act-tax-and-climate-bill.html
"If I was Darth Vader and I wanted to destroy the US
economy, I would do aggressive spending in the middle of an already hot
economy...This is the biggest bubble I've seen in my career." - Stanley
Druckenmiller, billionaire investor. (27 July 2021, back when the CPI was
around 3.0.)
“Rallies such as this month’s notwithstanding, I believe
stocks are only partway through a massive bear market, the inevitable
hangover from the biggest asset bubble in U.S. history, and thus today, July 29th, I took advantage of this
rally to reinstate our SPY short position.” - Mark B. Spiegel
of Stanphyl Capital
EX-ENERGY, S&P 500 REPORTING A YEAR-OVER-YEAR DECLINE
IN EARNINGS OF 4% FOR Q2 (FactSet)
“For Q2 2022, the blended earnings growth rate for the
S&P 500 is 6.7%...if the Energy sector is excluded, the S&P 500 would
be reporting a year-over-year decline in earnings of 3.7% rather than a
year-over-year increase in earnings of 6.7%.”
https://insight.factset.com/ex-energy-sp-500-reporting-a-year-over-year-decline-in-earnings-of-4-for-q2
SENTIMENT REBOUNDING TOO MUCH – 10 Aug (McClellan
Financial Publications)
“In the Investors Intelligence survey of newsletter
writers and investment advisors, the bulls are back to outnumbering the bears
once again, as fears of a further bear market are abating quickly...The
Investors Intelligence Bull-Bear Spread got all the way back to a positive
spread in January 2009, which was more optimism than was supported by the
magnitude of what prices were doing, and that excessive optimism had to get
unwound into the March 2009 final price low. So a similar scenario could
very well unfold this time.” Tom McClellan. Commentary at...
https://www.mcoscillator.com/learning_center/weekly_chart/sentiment_rebounding_too_much/
CALIFORNIA MEGA FLOOD (msn.com)
“The idea seems inconceivable — a month-long storm
that dumps 30 inches of rain in San Francisco and up to 100 inches of rain
and/or melted snow in the mountains. But it has happened before — most recently
in 1862 — and if history is any indicator, we’re overdue for another, according
to research published Friday in Science Advances that seeks
to shed light on the lurking hazard.” Story at...
A
‘megaflood’ in California could drop 100 inches of rain, scientists warn
(msn.com)
Yes, it is inconceivable that extreme weather happened
before global warming.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.4% to 4297.
-VIX bucked the trend and rose about 2% 19.53.
-The yield on the 10-year Treasury slipped to 2.787%.
PULLBACK DATA:
-Drop from Top: 10.4% as of today. 23.6% max.
-Trading Days since Top: 154-days.
The S&P 500 is 0.7% Below its 200-dMA & closed 8.6%
Above its 50-dMA.
-Resistance points for the rally, are: (1) 4328 &
4350, the 200-dMA & upper longer-term trend line, respectively; (2) or
4370, the 62% Fibonacci retracement point for those who believe in that sort of
thing.
The S&P 500 closed at its 56% retracement level. 50%
is about what we normally see in bounces during corrections, but that is only a
rough guide.
*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. Can’t seem to trim my short position, but
instead, I am trading against it with SSO.
SSO, 2xLong S&P 500 ETF.
TODAY’S COMMENT:
RSI is overbought; Bollinger Bands are not so I’ll ignore
these indicators for now. Bollinger Bands are close to overbought so another big
move up might generate a sell signal.
The S&P 500 is only 0.7% below its 200-dMA. That’s a major resistance point.
Unchanged volume was high today suggesting investor
indecision. If it had been a little higher, I might have considered calling it
a reversal indication.
Today, the daily sum of 20 Indicators slipped from +16 to
+14 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from +110 to +111. (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: SENTIMENT, VIX, PRICE & VOLUME are
bullish. 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.”
The key indicators remain Bollinger Bands and RSI. When
they are both overbought, it will be time to close out long, trading-positions.
I’m a Bear longer-term; short-term, the bulls are back in
control of the markets.
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
Looking at the above chart,
80% of the ETFs are above their 120-dMA. That chart looks like there is no
correction.
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
MONDAY MARKET INTERNALS (NYSE
DATA)
My basket of Market Internals slipped to HOLD.
(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, although technically, SSO
isn’t a stock, but an options based ETF.
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.
