Earnings Insight (Excerpt) ... Existing Home Sales ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“In another example of federal overreach under the Biden administration, Consumer Product Safety commissioner Richard Trumka Jr. suggests a gas stove ban.” - Michael Ramirez.

EXISTING HOME SALES (CNBC)
“Sales of previously owned homes dropped 1.5% in December from the previous month, according to the National Association of Realtors. Sales ended the year at a seasonally adjusted, annualized pace of 4.02 million units, which was 34% lower than December 2021. It is the slowest pace since November 2010, when the nation was struggling through a housing crisis brought on by faulty subprime mortgages.” Story at...
https://www.cnbc.com/2023/01/20/existing-home-sales-drop-in-december-to-slowest-pace-since-2010.html
 
EARNINGS INSIGHT EXCERPT (FactSet)
“The (blended) net profit margin for the S&P 500 for Q4 2022 is 11.4%, which is below the previous quarter’s net profit margin of 11.9% and below the year-ago net profit margin of 12.4%. However, it is equal to the 5-year average net profit margin (11.4%). If 11.4% is the actual net profit margin for the quarter, it will mark the sixth straight quarter in which the net profit margin for the index has declined quarter-over-quarter. It will also mark the lowest net profit margin reported by the index since Q4 2020 (10.9%).” Earnings insight at...
https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012023.pdf
My cmt: Profit margins equal to the 5-year average? Doesn’t look like much of an earnings recession to me.
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1.9% to 3973.
-VIX fell about 3% to 20.52.
-The yield on the 10-year Treasury rose to 3.480%.
 
PULLBACK DATA:
-Drop from Top: 17.2% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 263-days.
The S&P 500 is 0.1% ABOVE its 200-dMA & 1.1% ABOVE 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:
XLK – Technology ETF.
SSO – 2x S&P 500.
XLE – Energy Sector ETF. Low PE; good Dividend; decent momentum.
BA – (Boeing) I am late on this one, but we’ll see.
XLY - Consumer Discretionary ETF.
 
SHY – Short term bonds. 30-day yield is 4.2%. (Trailing 1-year yield is 1.3%.) I’ll hold this, but if the market retests the lows, I’ll sell it and buy stocks.)
 
TODAY’S COMMENT:
The S&P 500 moved back above its 50-dMA and its 200-dMA. Good news.
 
Today was a statistically significant up-day. That just means that the price-volume move exceeded my statistical parameters. Statistics show that a statistically-significant, up-day is followed by a down-day about 60% of the time. 
 
One indicator of note switched from neutral to bullish. The short-term, 10-day, Fosback Hi-Low Logic Index analyzes new-highs and new-lows.  When both are low, it suggests the markets will move higher. It is included in the bull list below. The longer-term version is close to a buy signal, but it is not there yet. These are very solid indicators. If the longer-term Fosback indicator turns bullish, it would be a significant confirmation that this rally has a long way to run.
 
On Fridays, I summarize a number of indicators to get a weekly feel for trend. The Friday rundown of indicators was little changed (6-bear and 17-bull) from last week. I expected the ensemble to turn more bearish, but that was not the case. (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 10-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-There was a Zweig Breadth Thrust 12 January. That’s a rare, very-bullish sign.
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bullish crossover 13 Jan.
-Smoothed Buying Pressure minus Selling Pressure is rising.
-MACD of S&P 500 price made a bullish crossover 11 Jan.
-Short-term new-high/new-low data.
-Long-term new-high/new-low data.
-The short-term, 10-day, Fosback Hi-Low Logic Index is bullish.
-McClellan Oscillator.
-The graph of the 100-day Count (the 100-day sum of up-days) is moving up.
-On average, the size of up-moves has been larger than the size of down-moves over the last month.
-XLI-ETF (Cyclical Industrials) is outperforming the S&P 500.
-The 5-day EMA is above the 10-day EMA so short-term momentum is bullish.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are both above the 20-dEMA.
-S&P 500 is outperforming Utilities (XLU-ETF) as of 20 January.
-67% of the 15-ETFs that I track have been up over the last 10-days.
 
NEUTRAL
-There have only been 3 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-Sentiment.
-Bollinger Bands.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is neutral although leaning bullish.
-There have been 6 up-days over the last 10 sessions – neutral.
-There have been 10 up-days over the last 20 sessions - neutral.
-RSI
-The Smart Money (late-day action) is mixed.
-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.
-The Calm-before-the-Storm/Panic Indicator flashed a panic-buying signal 10 November - expired.
-VIX indicator.
-90% down-volume days - the last one was 5 Dec. - neutral. (There has been a 90% up-volume day since then, but it did not meet all of the tests for a bullish 90% up-volume day.)
-The S&P 500 is 0.1% above its 200-dMA. (Bull indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-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.
 
BEAR SIGNS
-There have been 2 Distribution Days since the last Follow-thru day.
-The smoothed advancing volume on the NYSE is falling.
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is still below 50%, but not by much.
-Overbought/Oversold Index (Advance/Decline Ratio) is overbought. 
-My Money Trend indicator is declining.
-Slope of the 40-dMA of New-highs is falling.
 
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 6 bear-signs and 17-Bull. Last week, there were 5 bear-sign and 18 bull-signs.
 
The Friday rundown is still giving a solidly bullish indication. The shorter-term indicators are quite bullish, too.
 
Today, the daily sum of 20 Indicators improved from +1 to +6 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations decreased from +106 to 103. (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 improved to BUY: PRICE & VOLUME are positive. VIX & SENTIMENT are neutral.
(The important BUY in this indicator was on 21 October, 7-days after the bottom. My NTSM buy-signal was 27 September, based on improved internals at the retest low, about 2% before the bottom.)
 
Bottom line: I’m a BULL, but I am watching indicators closely.
 
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 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 75% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks.
 
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.