Recession Prediction ... Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

 “Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 
Again, not much market moving news today...
 
RECESSION PREDICTION (Federal Reserve Bank of San Francisco)
“Conclusion. This Economic Letter discusses recession predictions based on macroeconomic time series, particularly the jobless unemployment rate. This predictor is almost as accurate as the slope of the yield curve but is more accurate at shorter horizons. The jobless rate does not currently signal an impending recession, nor do other macroeconomic time series analyzed using the same methodology. In general, however, examining these series suggests that the business cycle is at a maturing stage when expansions typically come to an end.” Report at...
https://www.frbsf.org/economic-research/publications/economic-letter/2022/december/recession-prediction-on-clock/
 
COVID-19 (NSTM)
As shown in the following chart, Covid numbers have been rising steadily, but slowly. Yesterday, I learned that a good friend of ours here in Virginia came down with COVD. She and her husband are extraordinarily cautious because her elderly mother lives with her so it’s a surprise she got sick. Another friend in town had it and there are several cases in the neighborhood, too. Additionally, I had to cancel a trip to Alabama last night because my son has been sick and tested positive for Covid yesterday. He works at home and has limited outside contact. These folks have all been pretty sick. Anecdotally, it looks like Covid numbers are rising sharply even if the charts aren’t confirming that conclusion. Perhaps folks are self-testing so they are unreported? I got a booster today. Be careful out there!

The US crossed the 100-million threshold for total Covid cases recently.
 
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 1.2% to 3783.
-VIX rose about 2% to 21.14
-The yield on the 10-year Treasury rose to 3.884%.
 
PULLBACK DATA:
-Drop from Top: 21.1% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 248-days.
The S&P 500 is 5.7% BELOW its 200-dMA & 2.8% 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.
 
MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.
 
XLK – Technology ETF.
 
TODAY’S COMMENT:
Today marked the 6^th Distribution Day in the last 5-weeks of trading after the last Bullish Follow-thru Day.  That is a bearish sign for the markets...as if we needed a reminder. Junk bond spreads compared to the S&P 500 are crashing and that’s not good either.
 
There aren’t too many bull signs around.  The Friday run-down total of Bull signs was 6; now it’s down to 3.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-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.
 
Holiday trading is continuing today.  The volume remains about 30% below the monthly average, so we can’t take too much from this week’s market action.
 
Today, the daily sum of 20 Indicators dropped from zero to -1 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from +52 to 33. (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: VIX & SENTIMENT are neutral; PRICE is bullish; VOLUME is negative. 
 
Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. Apple is now at a market multiple, according to the CNBC Fast Money traders. That makes me wonder whether we are getting near an end to the tech selloff. If so, the October bottom may not be too far off the final bottom. We’ll see.  
 
Since the Index has broken below its 50-dMA, a retest of the October lows (about 5% below today’s close) seems likely. 
 
I’m now have about 40% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.
 
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
 
WEDNESDAY 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 40% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. Last week’s Friday-run-down indicator ensemble was bad enough to convince me to take a more conservative view of the markets.
 
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.