“Fed officials will meet Jan. 31-Feb 1 and are expected to raise interest rates by 0.25% in Wednesday's policy decision. A press conference held by Fed Chair Jerome Powell Wednesday afternoon will offer investors crucial signs regarding the central bank's path forward on rate increases. Finally, rounding out the week on Friday morning will be the government's January jobs report, set for release at 8:30 a.m. ET.” Story at...
“Economist Campbell Harvey has had a winning track record
since he showed in his dissertation at the University of Chicago decades ago
that the shape of the bond yield curve was linked to the path of US economic
activity...’My yield-curve indicator has gone code red, and it’s 8 for 8 in
forecasting recessions since 1968 — with no false alarms,’ Harvey, now a
professor at Duke University’s Fuqua School of Business, said in an interview
Tuesday. ‘I have reasons to believe, however, that it is flashing a false
signal’... Harvey’s model was linked to inflation-adjusted yields and he said
the fact inflation expectations are inverted — meaning traders see price
pressures easing through time — also eases odds for a recession ahead.” Story
at...
https://finance.yahoo.com/news/pioneering-yield-curve-economist-sees-151304568.html
My cmt: Professor Campbell “discovered” the yield curve
recession relationship so we should pay extra attention to his commentary.
“Overall, 29% of the companies in the S&P 500 have
reported actual results for Q4 2022 to date. Of these companies, 69% have
reported actual EPS above estimates, which is above the percentage of 67% at
the end of last week, but below the 5-year average of 77% and below the 10-year
average of 73%. In aggregate, companies are reporting earnings that are 1.5%
above estimates, which is below the percentage of 3.3% at the end of last week,
below the 5-year average of 8.6%, and below the 10-year average of 6.4%. If
1.5% is the actual surprise percentage for the quarter, it will mark the
second-lowest surprise percentage reported by the index since Q3 2012, trailing
only Q1 2020 (1.1%).
https://insight.factset.com/sp-500-earnings-season-update-january-27-2023
Some have claimed that today’s economy looks like 2008
and we’re going into recession. Last week, Chris Ciovacco looked at economic trends
in 2008 vs current trends with emphasis on the probabilities that we are going
into recession compared to the probability of recession in 2008. He covered a
number of charts on economic trends in 2008 compared to current data. Here’s
one chart from the presentation:
https://www.youtube.com/watch?v=i0HI7rbi6UU
“The Washington Post counted 1,096 people in the U.S. who were shot and killed by police in 2022. In previous years, about as many people - around 1,000 annually - have died this way. As Statista's Katharina Buchholz shows in the infographic below, most of those killed by police were male and armed...”
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 1.3% to 4018.
-VIX rose about 8% to 19.94.
-The yield on the 10-year Treasury rose to 3.538%.
PULLBACK DATA:
-Drop from Top: 16.2% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 269-days.
The S&P 500 is 1.6% ABOVE its 200-dMA & 1.9% 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:
QLD – (2xNas 100) The XLK bottomed 12 October, about the same time as when the S&P 500 retested its low. QLD seems like a decent bet even though the CNBC crowd doesn’t like Tech.
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:
With more companies reporting and a Fed meeting this week, we should expect choppiness.
Today, the daily sum of 20 Indicators declined from +6 to +1 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations decreased from +64 to 52. (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: PRICE is positive. VOLUME, 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.
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
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.)
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.
