Inflation is Over ... Michigan Sentiment ... Best DOW Stocks ... Best ETFs … Stock Market Analysis

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“Inflation on a forward-looking basis is low.” Proffessor Jeremy Siegel, Wharton School of Business
 
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer sentiment remained low from a historical perspective but continued lifting for the second consecutive month, rising 8% above December and reaching about 4% below a year ago. Current assessments of personal finances surged 16% to its highest reading in eight months on the basis of higher incomes and easing inflation. Although the short-run economic outlook fell modestly from December, the long-run outlook rose 7% to its highest level in nine months and is now 17% below its historical average. Year-ahead inflation expectations receded for the fourth straight month, falling to 4.0% in January from 4.4% in December.” Press release at...
http://www.sca.isr.umich.edu/
 
INFLATION IS OVER (CNBC)
“The CPI, which measure of basket of items most frequently purchased by consumers, homes, food, energy, apparel, etc., has not only stopped going up but, as of yesterday’s report, [12 Jan] showed its first monthly decline since inflation broke out... Core consumer prices have also sharply and rapidly descended from their mid-2022 peak...The markets are not the only indicators saying inflation has peaked, the data, themselves, are making the self-same case. Inflation is dead. Long live inflation!” – Ron Insana. Story at...
https://www.cnbc.com/2023/01/13/insana-says-the-case-is-clear-that-inflation-is-over.html?qsearchterm=inflation
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.4% to 3999.
-VIX fell about 3% to 18.35.
-The yield on the 10-year Treasury rose to 3.505%.
 
PULLBACK DATA:
-Drop from Top: 16.6% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 258-days.
The S&P 500 is 0.4% ABOVE its 200-dMA & 2.2% 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:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.
XLK – Technology ETF.
SSO – 2x S&P 500. (My indicators are improving.)
XLE – Energy Sector ETF. Low PE; good Dividend; decent momentum.
BA – I am late on this one, but we’ll see.
XLY - Consumer Discretionary.
 
TODAY’S COMMENT:
Sentiment turned Bullish today because there are too many bears betting against the markets. (I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in selected Rydex/Guggenheim mutual funds.) My buy-sell limits are based on a 5-day moving average and standard deviation analysis. The values might be much more negative at the bottom of a major crash, but for now, I am seeing investors betting the rally will fail at the 200-dMA, thus giving us a bull-signal. Sentiment has been bullish at various times during this bear market, most recently after the October 12 lows, so Sentiment alone cannot be used for market timing.
 
Looks like the Bears who were betting the rally would fail at the 200-dMA were wrong; the S&P 500 closed above its 200-day Friday. That may push markets higher next week.
 
On Fridays, I summarize a number of indicators to get a weekly feel for trend. The Friday rundown of indicators improved and shifted more bullish (5-bear and 18-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
-There was a Zweig Breadth Thrust 12 January. That’s a rare, very-bullish sign.
-There was a Follow-thru day 6 January and that cancels prior Distribution Days.
-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%.
-Sentiment.
-The smoothed advancing volume on the NYSE is increasing.
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bullish crossover 13 Jan.
-MACD of S&P 500 price made a bullish crossover 11 Jan.
-My Money Trend indicator is improving.
-Short-term new-high/new-low data.
-Long-term new-high/new-low data.
-McClellan Oscillator.
-VIX indicator. (VIX is falling fast enough to be bullish.)
-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.
-Slope of the 40-dMA of New-highs is rising.
-66% of the 15-ETFs that I track have been up over the last 10-days.
 
NEUTRAL
-There has only been 1 Statistically-Significant day (big moves in price-volume) in the last 15-days.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The short-term, 10-day, Fosback Hi-Low Logic Index is neutral although leaning bullish.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is neutral although leaning bullish.
-There have been 5 up-days over the last 10 sessions – neutral.
-There have been 9 up-days over the last 20 sessions - neitral.
-The graph of the 100-day Count (the 100-day sum of up-days) has flattened.
-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.
-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 0.4% 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.
-On average, the size of up-moves has been larger than the size of down-moves over the last month, but not enough to send a signal.
 
BEAR SIGNS
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is still below 50%, but not by much.
-Smoothed Buying Pressure minus Selling Pressure is falling, but just barely.
-Overbought/Oversold Index (Advance/Decline Ratio) is overbought. 
-S&P 500 is underperforming Utilities (XLU-ETF).
-Bollinger Bands.
 
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 5 bear-signs and 18-Bull. Last week, there were 6 bear-sign and 11 bull-signs.
 
The Friday rundown is giving a very bullish indication. The shorter term indicators are quite bullish, too.
 
Today, the daily sum of 20 Indicators remained +13 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +103 to 114. (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 BUY: VOLUME, VIX & SENTIMENT are positive; PRICE is neutral. (The important BUY in this indicator was on 21 October, 7-days after the bottom. The NTSM buy-signal was 27 September, based on improved internals at the retest low, about 2% before the bottom.)
 
Bottom line: “Looking good Billy Ray! Feeling good Lewis!” I’m a BULL. I am over-invested in the markets, back to where I was before the recent weakness got me worried that the S&P 500 might make a lower low, even though my analysis suggested that the bottom was roughly 3600 for the S&P 500.
 
I now have about 75% 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 so I am just resetting my stock allocation based on my analysis that showed the correction bottom probably occurred around 27 September. As the rally ages, I’ll cut back toward a 50% stock allocation more suitable for my status as a retiree.
 
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 BUY. (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.