“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
JOBLESS CLAIMS (SHRM)
“States reported that 222,000 workers filed for new unemployment benefits during the week ending Sept. 3, marking four straight weeks of declines...The generally low level of jobless claims overall signifies strong labor demand as companies try to attract and retain employees.” Story at...
https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/jobless-claims-september-8-unemployment.aspx
My cmt: This report is not good for inflation.
EIA CRUDE OIL INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.8 million barrels from the previous week. At 427.2 million barrels, U.S. crude oil inventories are about 3% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
HAS THE STOCK MARKET HIT BOTTOM – BofA SAYS NO (Fortune)
“In Bank of America’s view, the market has more room to drop [six out of 10 signs have yet to turn favorable for a market rebound]. And it’s unclear when all of the signals of a rebound will switch from red to green...
...As of Friday [9/2/2022], only four of the 10 criteria have been met. That means there are six more that must be hit before it’s really a market bottom, at least according to Bank of America’s formula.
The four indicators that are considered triggered:
-1. unemployment rate rising
-2. bear-to-bull ratio of major investors
-3. multiple bear market rallies of 5% or more (the bank says there have been two rallies of 5% or more so far)
-4. Purchasing Managers’ Index—a measure of the prevailing direction of economic trends in manufacturing—has improved on a year-over-year basis.
6 that need to switch:
-5.Federal Reserve must start cutting interest rates
-6.the equity risk premium, or excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the market, must increase by more than 75 basis points.
-7.the two-year Treasury yield must decline 50 basis points or more from its highs
-8.the yield curve must steepen;
-9.the trailing price-to-earnings ratio of the S&P 500 when added to the Consumer Price Index must be below 20;
-10.and there must be the presence of “Buy” signals within the Bank of America’s “Sell Side Indicator” that tracks average stock allocation recommendations by strategists.” Story at...
https://fortune.com/2022/09/03/stock-market-bottom-bank-of-america-signs/
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.7% to 4006.
-VIX fell about 4% to 23.61.
-The yield on the 10-year Treasury rose to 3.321%.
PULLBACK DATA:
-Drop from Top: 16.5% as of today. 23.6% max.
-Trading Days since Top: 171-days.
The S&P 500 is 6.4% Below its 200-dMA & 0.5% Below its 50-dMA.
The 50-dMA is now resistance.
*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.
SDS, 2x short S&P 500 ETF.
I have built these positions to significantly large values, although I am still not net short.
TODAY’S COMMENT:
Regarding #9, in the Bank of America piece above, the latest CPI reading is 8.5%. The current trailing PE for the S&P 500 is 18.6.
8.5+21.5= 30.0 It’s going to take a while to get to a value below 20. Per Bank of America’s formula, if the FED were to magically get the CPI to 2% overnight, PEs would still need to come down from current levels by 8%.
PE from...
https://www.wsj.com/market-data/stocks/peyields?mod=md_usstk_view_pe_yield_full
If earnings remain the same, then price would need to drop 8% from here. The correction bottom then would be 25% from the top, or around3,000 3600 (I used the wrong number as the top.). In an economic slowdown, we can expect earnings (the E in PE) to
fall too. That would drive prices lower. All this assumes Bank of America is
correct and I haven’t screwed up the simple math.
RSI and Advance/decline ratio are both still oversold so
we could see the move up continue for a bit. The S&P 500 could trade up to
its 50-dMA (4022) and/or the 100-dMA (4038). After that, I think the markets
return to selling.
I think we remain in a selling stampede. We noted earlier
that selling stampedes usually last 17 – 25 sessions, with only 1.5-to
three-day pauses/throwback rallies, before they exhaust themselves on the
downside. As of today, (if I am correct) this stampede down has lasted 15-days.
There’s probably more to come after this small bounce is exhausted.
Today, the daily sum of 20 Indicators declined from +3 to
+1 (a positive number is bullish; negatives are bearish); the 10-day smoothed
sum that smooths the daily fluctuations improved from +1 to +3. (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 HOLD: PRICE, SENTIMENT & VIX are neutral;
VOLUME is bearish. I 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; a retest of the prior lows (or close to the
lows) seems very likely.
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
THURSDAY MARKET INTERNALS
(NYSE DATA)
My basket of Market Internals remained NEUTRAL.
(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.)
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.
“States reported that 222,000 workers filed for new unemployment benefits during the week ending Sept. 3, marking four straight weeks of declines...The generally low level of jobless claims overall signifies strong labor demand as companies try to attract and retain employees.” Story at...
https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/jobless-claims-september-8-unemployment.aspx
My cmt: This report is not good for inflation.
“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.8 million barrels from the previous week. At 427.2 million barrels, U.S. crude oil inventories are about 3% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
“In Bank of America’s view, the market has more room to drop [six out of 10 signs have yet to turn favorable for a market rebound]. And it’s unclear when all of the signals of a rebound will switch from red to green...
...As of Friday [9/2/2022], only four of the 10 criteria have been met. That means there are six more that must be hit before it’s really a market bottom, at least according to Bank of America’s formula.
The four indicators that are considered triggered:
-1. unemployment rate rising
-2. bear-to-bull ratio of major investors
-3. multiple bear market rallies of 5% or more (the bank says there have been two rallies of 5% or more so far)
-4. Purchasing Managers’ Index—a measure of the prevailing direction of economic trends in manufacturing—has improved on a year-over-year basis.
-5.Federal Reserve must start cutting interest rates
-6.the equity risk premium, or excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the market, must increase by more than 75 basis points.
-7.the two-year Treasury yield must decline 50 basis points or more from its highs
-8.the yield curve must steepen;
-9.the trailing price-to-earnings ratio of the S&P 500 when added to the Consumer Price Index must be below 20;
-10.and there must be the presence of “Buy” signals within the Bank of America’s “Sell Side Indicator” that tracks average stock allocation recommendations by strategists.” Story at...
https://fortune.com/2022/09/03/stock-market-bottom-bank-of-america-signs/
-Thursday the S&P 500 rose about 0.7% to 4006.
-VIX fell about 4% to 23.61.
-The yield on the 10-year Treasury rose to 3.321%.
-Drop from Top: 16.5% as of today. 23.6% max.
-Trading Days since Top: 171-days.
The S&P 500 is 6.4% Below its 200-dMA & 0.5% Below its 50-dMA.
The 50-dMA is now resistance.
SH, short the S&P 500 ETF.
SDS, 2x short S&P 500 ETF.
I have built these positions to significantly large values, although I am still not net short.
Regarding #9, in the Bank of America piece above, the latest CPI reading is 8.5%. The current trailing PE for the S&P 500 is 18.6.
8.5+21.5= 30.0 It’s going to take a while to get to a value below 20. Per Bank of America’s formula, if the FED were to magically get the CPI to 2% overnight, PEs would still need to come down from current levels by 8%.
PE from...
https://www.wsj.com/market-data/stocks/peyields?mod=md_usstk_view_pe_yield_full
If earnings remain the same, then price would need to drop 8% from here. The correction bottom then would be 25% from the top, or around
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
