Unemployment ... Payroll Report ... Factory Orders ... ISM ... DOW Stocks ... ETFs … Stock Market Analysis

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
PAYROLL REPORT / UNEMPLOYMENT REPORT / AVG HOURLY EARNINGS
“Nonfarm payrolls increased by 223,000 in the last month of the year, according to the latest from the BLS published Friday. The unemployment rate in December fell to 3.5%...the lowest since 1969...On an annual basis, wages rose 4.6% in December, a slower pace than the 4.8% seen during the prior month.” Story at...
https://finance.yahoo.com/news/december-jobs-report-january-6-2023-125423740.html
 
FACTORY ORDERS (Yahoo Finance)
“New orders for U.S.-manufactured goods fell more than expected in November amid a sharp decline in bookings for aircraft, while higher borrowing costs cooled demand for other goods. The Commerce Department said on Friday that factory orders dropped 1.8%...” Story at...
https://finance.yahoo.com/news/u-factory-orders-tumble-november-152325805.html
 
ISM NON-MANUFACTURING (ISM via PRnewswire)
“The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: "In December, the Services PMI® registered 49.6 percent, 6.9 percentage points lower than November's reading of 56.5 percent. The composite index contracted for the first time since May 2020, when it registered 45.2 percent.” Press release at... 
https://www.prnewswire.com/news-releases/services-pmi-at-49-6-december-2022-services-ism-report-on-business-301715010.html
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 jumped up about 2.3% to 3895.
-VIX fell about 6% to 21.13
-The yield on the 10-year Treasury dropped to 3.563%.
 
PULLBACK DATA:
-Drop from Top: 18.8% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 254-days.
The S&P 500 is 2.5% BELOW its 200-dMA & 0.2% 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. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)
 
TODAY’S COMMENT:
Markets cheered the lower inflation rate inferred in the hourly wage data in today’s payroll report. On a yearly basis, hourly earnings inflation dropped from 4.8% to 4.6%, but there is a scary stat in plain view.  In MBA school they taught that the lowest possible unemployment rate was 4%. A rate of 3.5% unemployment implies a very hot economy and, to me, is worrisome for future Fed actions regardless of what inflation is doing. I’ll caution that I am not an economist so what do I know? Let’s see what the markets do next week.
 
The S&P 500 climbed a point or 2 above its 50-dMA, but was unable to stay there.
 
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. 
 
Friday, up-volume was greater than 80% of the total volume. If Monday is another high, up-volume day (>80%) it would be a nice sign for the bulls, suggesting more gains ahead.
 
On Fridays, I summarize a number of indicators to get a weekly feel for trend. The Friday rundown of indicators improved and shifted bullish (6-bear and 11-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
-Today, Friday, was a Follow-thru day and that cancels prior Distribution Days.
-The smoothed advancing volume on the NYSE is increasing.
-The 10-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%. (It’s about time for this one.)
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-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.
 
NEUTRAL
-There have only been 3 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-Sentiment.
-Bollinger Bands.
-RSI
-Overbought/Oversold Index (Advance/Decline Ratio). 
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The short-term, 10-day, Fosback Hi-Low Logic Index.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is neutral.
-The graph of the 100-day Count (the 100-day sum of up-days) has flattened.
-There have been 4 up-days over the last 10 sessions – neutral.
-There have only been 9 up-days over the last 20 sessions.
-The Smart Money (late-day action) is mixed.
-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.
-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.
- 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 fr a bullish 90% up-volume day.
-The Calm-before-the-Storm/Panic Indicator flashed a panic-buying signal 10 November - expired.
-The S&P 500 is 2.5% 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.
-Slope of the 40-dMA of New-highs is flat.
-Only 49% of the 15-ETFs that I track have been up over the last 10-days.
 
BEAR SIGNS
-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. although it has been improving.
-Smoothed Buying Pressure minus Selling Pressure is falling.
-MACD of S&P 500 price made a bearish crossover 6 Dec. although it has been improving this week.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA are both below the 20-dEMA.
-S&P 500 is underperforming the Utilities (XLU.
 
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-sign and 11-Bull. Last week, there were 13 bear-sign and 9 bull-signs.
 
We see more bullish signs today. Still, the 50-dMA remains the key for me; if the S&P 500 can climb above its 50-dMA and remain for consecutive days, I’ll be adding to stock holdings.
 
Today, the daily sum of 20 Indicators improved from +9 to +11 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +57 to 59. (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 is positive; VOLUME, PRICE & SENTIMENT are neutral. 
 
Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish.
 
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
 
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 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.