Chicago PMI ... Employment Cost Index ... Consumer Confidence ... Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
A MIX OF OPINIONS:
-“The recent sell-off in stocks might spook investors. Consumers, too, might think that the economy’s slowing down. But Goldman Sachs’ chief equity strategist thinks such negative sentiment gives rise to a ‘buying opportunity’...” – CNBC PRO
-“Investors are finally feeling a little bit more confident that perhaps we priced in enough bad news and that’s really manifesting in a stronger market today (Monday).” - Art Hogan, chief market strategist at B. Riley Financial.
-“Correction since July hasn’t run its course.” -  Ari Wald, head of technical analysis at Oppenheimer
 
CHICAGO PMI
The latest Chicago Purchasing Manager's Index (Chicago Business Barometer) inched down to 44.0 in October from 44.1 in September. The latest reading is worse than the 45.0 forecast and marks the 14th straight month in contraction territory.” Commentary at...
https://www.advisorperspectives.com/dshort/updates/2023/10/31/chicago-pmi-practically-unchanged-in-october
 
EMPLOYMENT COST INDEX (NY Times)
“A measure of pay and benefits that officials at the Federal Reserve have been watching closely as they try to gauge the heat of the labor market grew at a moderate pace over the summer. The Employment Cost Index, a quarterly measure from the Labor Department that tracks changes in wages and benefits, climbed 1.1 percent in the third quarter of 2023 versus the prior three months. That was slightly faster than the 1 percent that economists expected and up from the previous 1 percent reading.”  Story at...
https://www.nytimes.com/2023/10/31/business/economy/wage-growth-inflation-federal-reserve.html
 
CONSUMER CONFIDENCE (Conference Board via prnewswire)
"Consumer confidence fell again in October 2023, marking three consecutive months of decline," said Dana Peterson, Chief Economist at The Conference Board. "October's retreat reflected pullbacks in both the Present Situation and Expectations Index. Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular. Consumers also expressed concerns about the political situation and higher interest rates. Worries around war/conflicts also rose, amid the recent turmoil in the Middle East. The decline in consumer confidence was evident across householders aged 35 and up, and not limited to any one income group." Press release at...
https://www.prnewswire.com/news-releases/us-consumer-confidence-fell-again-in-october-301972824.html
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.7% to 4194.
-VIX fell about 8% to 18.14.
-The yield on the 10-year Treasury rose to 4.926%.
 
PULLBACK DATA:
-Drop from Top: 13.1%. 25.4% max (on a closing basis).
-Trading Days since Top: 458-days.
The S&P 500 is 1.8% BELOW its 200-dMA and 4.4% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the major bear-market 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 2022 lows).
XLY - Consumer Discretionary ETF. (Holding since the October 2022 lows - I bought more XLY Monday, 8/21.)
I took profits and then reestablished positions as follows:
SPY – I bought a large position in 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.
CSCO – added 9/5.
 
TODAY’S COMMENT:
VIX came down a lot today and my VIX indicator was close to issuing a buy, although it didn’t quite get there. The Options Players appear to be betting the correction is over. Today’s action looked like “correction over,” but without more signals, I can’t make that call. I’d like to see New-high/New-Low data improve and improvement in Breadth. Still, I feel a lot more bullish today than I have for the last several weeks.  
 
To break the correction, we need to see the S&P 500 break above its downward sloping, upper trend-line around 4325.
 
The daily spread of 20 Indicators (Bulls minus Bears) declined from -7 to -8 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -65 to -82. (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 SELL: PRICE was bullish; VOLUME & VIX are bearish; & SENTIMENT is neutral. I may be following this indicator; but not yet. I am still watching price action around the 200-dMA. It appears that the S&P 500 is close to a bottom and may have bottomed Friday.
 
(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
We could still see more selling before this downturn winds down, but my guess is that a bottom is near and we may have seen the bottom Friday. Still, I’m over invested.  4100 is my line in the sand and a drop below it will force me to sell some stocks.
 
ETF - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:
Momentum charts are not good since all of the ETFs are below their 120-dMA.  Ranking follows:
1)    XLE
2)    ITA
3)    XLK
 
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
 
TUESDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals remained HOLD. (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 75% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. I’m “over invested” now expecting new, all-time highs this year. That burns all the cash.  I have about 25% of the portfolio in bonds.
 
I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. When I see a definitive bottom, I add a lot more stocks to the portfolio using an S&P 500 ETF as I did back in October.