Jackson Hole Speech ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
FED CHAIR POWELL JACKSON HOLE SPEECH (AP News)
“The continued strength of the U.S. economy could require further interest rate increases, Federal Reserve Chair Jerome Powell said Friday in a closely watched speech that also highlighted the uncertain nature of the economic outlook.
Powell noted that the economy has been growing faster than expected and that consumers have kept spending briskly — trends that could keep inflation pressures high. He reiterated the Fed’s determination to keep its benchmark rate elevated until inflation is reduced to its 2% target.” Story at...
https://apnews.com/article/inflation-federal-reserve-rates-economy-jackson-hole-9a720711618c0cfd851b51b0786af4f0
 
M2 CONTINUES TO FALL MAKING STOCKS OVERVALUED (McClellan Financial Publications)
“What we face now is a situation wherein money supply is shrinking, but stock prices were still rising as of July.  And... that combination has been pushing up the ratio of the SP500 Index level to M2.  This is a very high level historically speaking.  It did go higher in the late 1990s thanks to the Internet bubble, with predictably painful effects afterward. All of the other instances of this ratio being up this high have also led (eventually) to bear markets.” Commentary at... 
https://www.mcoscillator.com/learning_center/weekly_chart/m2_continues_to_fall_making_stocks_overvalued/
My cmt: Valuation not a good timing indicator for stocks.  Valuations can always go higher. Now, we have more investors (a new generation is now investing) chasing fewer stocks. One would expect higher valuations; but I still think we are in a 1998 analogue. A big Bear Market is probably a couple of years away.
 
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.7% to 4405.71.
-VIX slipped about 10% to 15.47.
-The yield on the 10-year Treasury slipped to 4.224
 
PULLBACK DATA:
-Drop from Top: 8.1%. 25.4% max (on a closing basis).
-Trading Days since Top: 413-days.
The S&P 500 is 6.3% ABOVE its 200-dMA and 1.2% 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 and we called a buy on 4 October 2022.
 
MY TRADING POSITIONS:
XLK – Technology ETF (holding since the October lows).
XLY - Consumer Discretionary ETF. (Holding since the October lows - I bought more XLY Monday, 8/21.)
SPY – I bought the S&P 500 Friday, 8/14, in my 401k (it has limited choices).
XLE – Added Tuesday, 8/22.
SSO – 2x S&P 500 ETF.  (Added 8/24. I’ll sell this in a hurry if the Index falls.)
 
TODAY’S COMMENT:
I must have been asleep when I wrote yesterday’s blog.  There was no Fed meeting today, as a few readers wrote to correct me. The “Fed Speak” issue was Chairman Powell’s Jackson Hole speech today.  Last year the speech was a shocker; this year there was mostly nothing new. But Powel did suggest more hikes might be needed. This time, the  markets were up after the speech.
 
I expect the markets to retake prior highs sooner or later. If the stock market weakness is over, (as I think it is) it will be sooner. That’s why I have been buying recently. From day one, I have suggested a big retreat was not in the cards and a retreat short the 50-dMA was the most likely scenario. It went a little deeper than I expected, but it was close. Still, short-term calls are mostly dumb luck.  If the weakness is over, I’ll chalk it up to luck or just being dumb

The 10-dMA of Breadth is improving slowly. The 50-dMA of Breadth never did signal a correction; those are two reasons I am bullish.
 
We look at a summary of indicators on Friday: The weekly rundown of indicators were a little changed – fewer Bull signs & fewer Bear signs (now 13-bear and 7-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 Follow Thru Day 23 Aug
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-The long-term, 50-dEMA, Fosback Hi-Low Logic Index.
-XLI-ETF (Cyclical Industrials) is slightly outperforming the S&P 500 – call it bullish.
-There have been 7 up-days over the last 20 sessions - bullish.
-The Smart Money (late-day action).
 
NEUTRAL
-10 August there was a Bullish Outside Reversal Day. Expired
-There have been 3 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-My Money Trend indicator is flat.
-RSI.
-Sentiment.
-Bollinger Band Squeeze 28 April - expired.
-Bollinger Bands.
-The S&P 500 is 6.3% above its 200-dMA. (Bear indicator is 12% above the 200-day.)
-Overbought/Oversold Index (Advance/Decline Ratio).
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bearish crossover 3 August, however, it is improving rapidly – call it Nuetral.
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) has not been below 50%, for more than 3 days in a row.
-There was a Zweig Breadth Thrust 31 March. That’s a rare, very-bullish sign, but the McClellan Oscillator subsequently turned negative, so this indicator has expired.
-The short-term, 10-day EMA, Fosback Hi-Low Logic Index is neutral.
-There have been 4 up-days over the last 10 sessions – neutral.
-VIX indicator.
-MACD of S&P 500 price made a bearish crossover 27 July, but is improving rapidly.
-On average, the size of up-moves has been smaller than the size of down-moves over the last month, but not enough to send a signal.
-The Calm-before-the-Storm/Panic Indicator flashed a top warning signal 31 July & 1 August. That looks like it was the short-term top.
-There was a 90% down-volume day 9 March.
-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.
 
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-There was a Hindenburg Omen signal 6 Aug 2023. This remains in effect until the McClellan Oscillator turns positive.
-The 10-dMA percentage of issues advancing on the NYSE (Breadth) is below 50%.
-Smoothed Buying Pressure minus Selling Pressure is falling.
-Long-term new-high/new-low data.
-Short-term new-high/new-low data.
-McClellan Oscillator.
-Slope of the 40-dMA of New-highs is falling.
-The graph of the 100-day Count (the 100-day sum of up-days).
-The 5-10-20 Timer System is SELL.
-The 5-day EMA is below the 10-day EMA, so short-term momentum is bearish.
-39% of the 15-ETFs that I track have been up over the last 10-days. (45-55% is neutral.)
-S&P 500 spread vs. Utilities (XLU-ETF) shows the Index outpacing Utilities, but the trend has been down.
 
On Monday’s update of the Friday summary of indicators (20 December 2021), 9 days before the top of the current 25% correction, there were 21 bear-signs and zero bull-signs. Now there are 13 bear-signs and 7-Bull. Last week, there were 16 bear-sign and 8 bull-signs.
 
The daily spread of 20 Indicators (Bulls minus Bears) improved from -9 to -7 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -57 to -58. (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, VIX, VOLUME & SENTIMENT are neutral.
 
(The important BUY in this indicator was on 21 October, 7-days after the bottom. For my NTSM overall signal, I suggested that a short-term buying opportunity occurred on 27 September (based on improved market internals on the retest), although without market follow-thru, I was unwilling to call a buy; however, I did close shorts and increased stock holdings. I issued a Buy-Signal on 4 October, 6-days before the final bottom, based on stronger market action that confirmed the market internals signal. The NTSM sell-signal was issued 21 December, 9 sessions before the high of this recent bear market, based on the bearish “Friday Rundown” of indicators.)
 
Bottom line: I remain a “concerned” Bull. (I guess I can’t be “cautious” if I am more than fully invested. Caution to the wind! Hope I haven’t gotten too greedy.)
 
ETF - 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
 
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 SELL. (My basket of Market Internals is 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 70% 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 as I did back in October.