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 “Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“For decades we disagreed with [Supreme] Court rulings when progressives held sway, but we never called the Court illegitimate. But now that the left has lost the Court as a backup legislature for its policy goals, the institution is supposedly broken. Tell us again who is the threat to democratic institutions?” – WSJ Editorial Board.
 
“We are experiencing a near total failure of leadership in our country. Politicians on both sides are fueling rage for personal and political advantage. It is a dangerous and craven form of demagoguery. James Freeman Clarke once said that “a politician thinks of the next election; a statesman thinks of the next generation.” We have far too many politicians today and far too few statesmen at an increasingly perilous time for our country.” – Jonathan Turley, Shapiro Chair for Public Interest Law at the George Washington University Law School.
 
WATCH REAL YIELDS (RIA)
“...the [current] change in real yields [bond yield minus inflation] is due to lower inflation expectations and much higher nominal yields. Over more extended periods, nominal yields are a function of economic growth and inflation expectations. Given that high rates are and will be a drag on economic growth and will dampen inflation, we think nominal and real yields will be headed lower over the coming months.
The current real yield on a five-year Treasury note is 1.62%. Over the last 20 years, the actual real yield attained on five-year notes has averaged 0.47%. Accordingly, five-year yields may be trading over 1% too high...The Fed may keep raising rates, but the economy will falter. With it, inflation will decline. Nominal yields should fall precipitously to catch up with inflation and growth fundamentals. Real yields should follow. If so, the outlook for stocks, bonds, gold, and commodities may be brighter than it has been. Conversely, the recent dollar strength may be close to peaking.” Commentary at...
https://realinvestmentadvice.com/turn-off-cnbc-and-watch-real-yields
 
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 0.8% to 3612.
-VIX rose about 3% to 32.45.
-The yield on the 10-year Treasury rose to 3.957%.
 
PULLBACK DATA:
-Drop from Top: 24.7% as of today. 25.2% max (on a closing basis).
-Trading Days since Top: 193-days.
The S&P 500 is 13.7% Below its 200-dMA & 9.1% Below its 50-dMA.
Support is around 3585, the low of 5 October 2020.
 
*I won’t call the correction over until the S&P 500 makes a new-high; however, we may have seen the bottom, or at least near the bottom.
 
MY TRADING POSITIONS:
CVX – (I may hold this as a long-term position. I already owned a small position in CVX.)
SPY – S&P 500 (I may hold this as a long-term position.)
IWM - Russell 2000. (I may hold this as a long-term position.)
 
TODAY’S COMMENT:
Two schools of thought: (1) This is a bear market crash that will lead to a bottom 35-50% below the all-time highs. (2) This is a typically weak time in the Presidential cycle and this is a normal correction in a mid-term off Presidential election year; the bottom has occurred or will occur in October.
 
I think we’re in a vicious bear market that will cause the S&P 500 to drop another 15%-25%; but that’s not what the indicators are saying. I post every day, “Trade what you see (the indicators) not what you think.” That’s hard to do when everyone is talking about the bear market, but I got a definite buy signal. Here’s a link to the discussion on 27 September when I got the buy signal...
http://navigatethestockmarket.blogspot.com/2022/09/best-dow-stocks-best-etfs-stock-market_27.html
 
Here’s what we see today:
Today, the S&P 500 closed within 1% of the recent September 30 low of 3586. Volume was almost 35% lower than it was at the September low. Selling is winding down while internals are much improved over the recent lows and the June low. Perhaps that will change after the CPI data is released Wednesday. I suppose it is possible that the bullish signs are just a fakeout, but for now, I haven’t seen anything that changes the fact that the analysis indicates that the zone around prior lows (3586 to 3667) is probably a good buying point.
 
If markets fall much around the old lows, I’ll be looking at buying leveraged long positions – QLD or UWM, but I want to wait until there are more bullish signs.
 
Today, the daily sum of 20 Indicators improved from +4 to +8 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations improved from -12 to +7. (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 to HOLD: VIX is bearish; SENTIMENT and PRICE are bullish; VOLUME is neutral. 
 
Bottom line: I’m a Bull; I’m now invested with about 65% invested in stocks. I’ll cut back to 50% if I see bearish indicators sharply warning. I’ll add leveraged long positions (QLD, UWM) if we see a pullback to the prior lows and strong bullish signs. (As a retiree, 50% invested in stocks is my “normal” portfolio.)
 
BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.
#1. XLE  #2. IBB  #3. XLV

*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)
DOW 30 momentum ranking follows:
#1. UNH  #2. CVX #3. WMT

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 remained 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 current invested position is about 65% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. I’ll cut back on stocks if we see serious bear signs.
 
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.