Momentum Trading DOW Stocks & ETFs … Stock Market Analysis ...

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“Since 1929 there have been typically been an average of 1.1 or more declines of 10% each year. The last 10% decline happened on 8/16/2022. Statistically a 10% decline was due. Note that there is a 46% chance that a 10% decline extends into a 15% decline.” – Dan Hagan Asset Management.
 
“How you do anything is how you do everything.” - Basketball Hall of Famer Dirk Nowitzki as told by Mark Cuban told GQ last month:
 
"The reason why the spare tire isn't included on our new electric vehicles is actually a safety concern. The problem is if the vehicle is in an accident, the spare tire can cause damage to the electric battery which could cause a failure in the battery." – Honda explaining why they don’t offer a spare in their EVs.
 
BUDGET DEFICIT DOUBLED IN ONE YEAR UNDER BIDEN (Washington Examiner)
“...Treasury Secretary Janet Yellen said the federal government ran a $1.7 trillion deficit for fiscal 2023, which ended Sept. 30. That's up from a $1.4 trillion federal budget deficit posted in 2022... Yellen's math ignores another $300 billion in debt incurred by President Joe Biden's student debt cancellations, bringing the actual total of the deficit under the president to a full $2 trillion. Fix that adjustment for fiscal 2022, and that year's deficit amounted to a little less than $1 trillion. This means that in just one year, sans recession and sans war, the federal government under Biden managed to double the deficit by more than $1 trillion.” Story at...
How the federal budget deficit doubled under Biden in a single year (msn.com)
 
THE CASE FOR WIND POWER WAS BASED ON LIES (The Telegraph – News from Great Britain)
“Wind is already the cheapest form of power and will save us a fortune in future. We know this because the green energy lobby keeps telling us so. But it is hard to square with the words of Tom Glover, chair of energy company RWE’s UK arm, last week. No more offshore wind farms will be built, he said, unless the Government hikes the guaranteed long-term prices offered to their operators by as much as 70 per cent. The energy “market” is not really much of a market at all, not when it comes to green energy. The Government underwrites wind and solar through “contracts for difference” – guaranteeing operators a minimum “strike price”, rising with inflation, for every megawatt-hour of electricity they generate over 15 years... Last time the Government held an auction for the right to build offshore wind farms, in September, it received not a single bid... If we are going to have a grid based on intermittent renewables, it is no use looking just at the cost of generation. We have to add on the cost of energy storage, or some other kind of back-up – or else build so many wind and solar farms that we have just enough power at the worst of times, and a super-abundance of it at other times.
All are likely to be horrendously expensive.” Story at... 
The case for wind power was built upon a falsehood (msn.com) 
My cmt: We can be sure that the US has its own system of subsidies for wind and solar.
 
McCLELLAN OSCILLATOR - BULLISH DIVERGENCE (McClellan Financial Publicatons)
“Two weeks ago, I wrote here about the McClellan Oscillator leaving a "simple" structure above zero, which said that the bulls were not (yet) in charge.  The major averages since then have pushed to a lower low, even as seasonality says that the uptrend is supposed to be starting again now.  But as prices have made lower lows, the NYSE's McClellan A-D Oscillator is making a bullish divergence, which says that the energy is going out of the decline... One problem with a divergence, either a bullish or a bearish one, is that it is only a "condition" and not a "signal"... Stock prices do not have to start turning upward just because of a bullish divergence in the McClellan Oscillator.  But it sure helps.” – Tom McClellan. Commentary at...
https://www.mcoscillator.com/learning_center/weekly_chart/mcclellan_oscillator_bullish_divergence/
 
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.2% to 4167.
-VIX fell about 7% to 19.74.
-The yield on the 10-year Treasury rose to 4.888%.
 
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:
Last week had a few odd days where volumes were low, but Internals were poor; or Internals were good and volume was high. We wanted to see good internals on lower volume at a new low.  The markets didn’t get there, but it is possible that the improving internals were trying to tell us something. There were some bottom signs with both Bollinger Bands and RSI oversold. We also had Buying Pressure minus Selling Pressure trending higher in a bullish divergence.  As Tom McClellan pointed out in the commentary above, the McClellan Oscillator was/is also diverging to the bullish side.
 
Was Friday the low for this 10% pullback after a nearly 20% run up from the October 2022 low? Maybe, maybe not.  I suspect that if it isn’t the final low, it is very close to it. One thing we don’t want to see is a break of the 4100 level on the S&P 500.  That looks like a line in the sand. A break could lead to serious selling. I don’t expect that to happen, but then, I didn’t expect a 10% correction either.
 
The daily spread of 20 Indicators (Bulls minus Bears) improved from -9 to -5 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations declined from -55 to -63. (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. 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 way 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)    XLK
3)    S&P500 - SPY
 
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

MONDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals improved to 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.