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“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“Good judgment comes from experience, and most of that comes from bad judgment.” – Hillbilly Wisdom.
 
S&P 500 GLOBAL (IHS MARKIT) US COMPOSITE PMI (S&P Global)
“US private sector firms signaled a further decline in output during December, according to latest ‘flash’ PMI™ data from S&P Global. The downturn gathered pace, as business activity fell at the joint-sharpest rate since May 2020. Manufacturers and service providers alike registered steeper decreases in output, as weaker demand conditions, inflation and hikes in interest rates dampened activity levels. The headline Flash US PMI Composite Output Index registered 44.6 in December, down from 46.4 in November, to signal the joint-fastest decline in business activity for over two-and-a-half years...” Press release at...
https://www.pmi.spglobal.com/Public/Home/PressRelease/2449edd6ab0a49b9bd0103ecc24a28b3
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 1.1% to 3852. (That seemed like good news – the markets were down a lot more mid-day.)
-VIX went against trend and slipped about 1% to 22.62,
-The yield on the 10-year Treasury rose to 3.489%.
 
PULLBACK DATA:
-Drop from Top: 19.7% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 241-days.
The S&P 500 is 4.3% BELOW its 200-dMA & 0.3% BELOW its 50-dMA.
 
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area and I am fully invested with a higher percentage of stocks than normal.
 
MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.
 
QLD – 2x Nas 100
XLK – Technology ETF
 
SOLD
CVX – (I sold  newly acquired shares {last-in, first-out}. I already owned a small position in CVX that I kept.)
DDM – 2x Dow 30.
XLI – Industrial ETF
 
TODAY’S COMMENT:
The S&P 500 closed 0.3% below its 50-dMA – another close there would be more bearish. For a trend break, I like to see 2 consecutive closes below a trend line, so we’ll see what happens next week.
 
I can draw new trend lines around the S&P 500 based on recent market action; it now looks more like the Index is on, or slightly below its lower trend line now. That makes sense since the lower trend line is usually close to the 50-dMA.
 
On Fridays, I summarize a number of indicators to get a weekly feel for trend. The Friday rundown of indicators shifted from neutral to outright bearish (16-bear and 6-bull). These indicators tend to be both long-term and short-term, so they are different than the 20 that I report on daily. 
 
BULL SIGNS
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-Bollinger Bands are oversold.
-Long-term new-high/new-low data.
-There have only been 7 up-days over the last 20 sessions – bullish.
-On average, the size of up-moves has been larger than the size of down-moves over the last month.
-VIX indicator.
 
NEUTRAL
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) has been above 50%, for 3 days in a row ending the “correction-now” signal.
-RSI
-The short-term, 10-day, Fosback Hi-Low Logic Index.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is neutral.
- 90% up-volume days – the last one was down - neutral.
-XLI is outperforming the S&P 500, but the outperformance is dropping so let’s call this neutral.
-Overbought/Oversold Index (Advance/Decline Ratio). 
-There have been 3 Distribution Days since the last follow0thru day, but 3 is not enough to send a signal.
-There have been 3 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-Sentiment.
-There have been 3 up-days over the last 10 sessions – neutral.
-The Calm-before-the-Storm/Panic Indicator flashed a panic-buying signal 10 November - expired.
-The S&P 500 is 4.3% 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 a long time ago - expired.
-There was a Hindenburg Omen signal 8 April – 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 2022. (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
-The 52-week, New-high/new-low ratio improved by 3.5 standard deviations. More simply, the spread between new-highs and new-lows improved by 716 on 14 October. That’s a solid bottom sign at a retest. – Expired.
-13 & 21 Oct were Bullish Outside Reversal Days with no Bearish Outside Reversal days since then - expired.
-The Smart Money (late-day action) is neutral.
 
BEAR SIGNS
-The 10-dMA percentage of issues advancing on the NYSE (Breadth) is below 50%.
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is below 50%
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bearish crossover 15 Dec.
-The smoothed advancing volume on the NYSE is falling.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500 remains bearish.
-MACD of S&P 500 price made a bearish crossover 6 Dec.
-My Money Trend indicator is falling.
-Short-term new-high/new-low data.
-Slope of the 40-dMA of New-highs is falling.
-McClellan Oscillator.
-The graph of the 100-day Count (the 100-day sum of up-days) is falling sharply.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA are both below the 20-dEMA.
-The 5-day EMA is above below the 10-day EMA so short-term momentum is bearish.
-Smoothed Buying Pressure minus Selling Pressure is falling.
-S&P 500 is underperforming the Utilities (XLU).
-Only 33% of the 15-ETFs that I track have been up over the last 10-days.
 
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 16 bear-sign and 6-Bull. Last week, there were 10 bear-sign and 12 bull-signs.
 
Friday-indicators dropped from neutral last week, to bearish this week.  2 weeks ago, indicators were extremely bullish.
 
Today, the daily sum of 20 Indicators remained +1 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from +112 to 92. (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: SENTIMENT is neutral; VIX & PRICE are bullish; VOLUME is negative. 
 
Bottom line: Given the deterioration in the indicators I took profits in DDM (2x Dow) & XLI (Industrials). I sold newly acquired CVX shares (Chevron) too, but that was partly to take profits and prepare to shift to a better momentum stock.  Mostly though, I am reducing risk.  The indicators are suggesting a retreat to the October lows is much more likely.  Based on previous tests in June and October, the October low is likely to hold (more or less) even if the Index does fall that low. That optimism may not remain if the Fed continues hiking. I’ll sell tech holdings early next week if weakness continues.
 
I’m a reluctant Bear at this point.  Indicators are pointing down, but I think the markets may bounce higher next week. When there is conflict between what you think and what you see (in the indictors), take the indicators.
 
As previously noted, I think the bottom was 3577 on 12 October. There is always the possibility that the markets could retest those lows, but it seems unlikely that a retest will occur in 2022, although the recent market action is shaking my confidence in that call.
 
I’m now invested with about 55% of the portfolio invested in stocks. (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.
*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:

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 SELL. 
(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 55% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. I’ll cut back more on stocks if we see more weakness.
 
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.