“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“It was Thomas Edison who brought us electricity, not the
Sierra Club. It was the Wright brothers who got us off the ground, not the
Federal Aviation Administration. It was Henry Ford who ended the isolation of
millions of Americans by making the automobile affordable, not Ralph Nader.
Those who have helped the poor the most have not been those who have gone
around loudly expressing 'compassion' for the poor, but those who found ways to
make industry more productive and distribution more efficient, so that the poor
of today can afford things that the affluent of yesterday could only dream
about.” ― Thomas Sowell, senior fellow at
the Hoover Institution.
Chart from EIA at...
https://www.eia.gov/outlooks/aeo/pdf/AEO2023_Release_Presentation.pdf
NEW HOME SALES (Yahoo Finance)
“Sales of new U.S. single-family homes surged to a
19-month high in September as the annual median house price dropped by the most
since 2009 amid discounts offered by builders to woo buyers, but mortgage rates
flirting with 8% could curb demand.”Story at...
https://finance.yahoo.com/news/wrapup-1-us-home-sales-161416719.html
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the
previous week. At 421.1 million barrels, U.S. crude oil inventories are about
5% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
GROPING FOR A BOTTOM (Heritage Capital)
“The S&P 500 fell below 4200 on Monday and into the
next range for a potential bottom. Like we saw a few weeks ago, price has met
at least the minimum downside target. The key now is for there to be
confirmation which is supposed to come this week. One of the items that
continues to not line up for the low that launches the rally into January is
that the Volatility Index (VIX) seems to just be rallying and isn’t spiking
like we usually see at solid bottoms. Mind you, it doesn’t have to do, but it’s
something I like to see. Maybe it comes today or tomorrow or not at all. We
will see.” _ Paul Schatz, President Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/groping-for-a-low-again/
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell 1.4% to 4187.
-VIX rose about 6% to 20.19.
-The yield on the 10-year Treasury rose to 4.961%.
PULLBACK DATA:
-Drop from Top: 12.7%. 25.4% max (on a closing basis).
-Trading Days since Top: 455-days.
The S&P 500 is 1.2% BELOW its 200-dMA and 4.2%
BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500
makes a new-high; however, evidence suggests the 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:
8 out of the last 10-days have been down for the S&P
500. 9 out of 10 would be a buy signal
for this indicator, though we’d need to see more bullish indicators before the
system would give a buy signal overall. It will take at least 3 more down days
before the Index sees 9 out of 10 down days.
Today was a statistically significant down-day. That just
means that the price-volume move exceeded my statistical parameters. Statistics
show that a statistically-significant, down-day is followed by an up-day about
60% of the time. Bottoms almost always
occur on or near Statistically-significant, down-days, but not all
statistically-significant, down-days occur at bottoms.
Wednesday looked like panic selling, so we can always
ask, was it a sign of a bottom? It doesn’t look like it. The S&P 500 made a
new low, but internals were worse and there weren’t any other bottom signs.
Utilities (XLU-ETF) are now outperforming the S&P
500. That was one of the 2 remaining bullish indicators from the Friday summary
of indicators.
Another bear sign: The S&P 500 broke back below its
200-dMA.
The daily spread of 20 Indicators (Bulls minus Bears) improved
from -11 to -10 (a positive number is bullish; negatives are bearish); the
10-day smoothed sum that smooths the daily fluctuations declined from -26
to -43. (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: VOLUME & VIX are bearish; PRICE & SENTIMENT are neutral.
I may be following this indicator soon; but not yet. I am still watching price
action around the 200-dMA.
(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
Until today, this pullback had been orderly. Now it looks
like there is some real fear in the markets. I am guessing that we may see another
week or more of selling before this downturn winds down.
Assuming that tomorrow is another down day, I’ll sell
leveraged positions and maybe take profits (where I have them) to cut stock
holdings back to more reasonable levels. This could turn out to be selling at
the exact wrong time, so I’ll be prepared to repurchase stocks later if I can
spot a bottom...or not sell at all if market internals look better Thursday.
I’ll probably wait till later in the day before I take
any actions. I’ll post when I take action or if I learn anything new.
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
WEDNESDAY 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 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.
