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

 
IS THE STOCK MARKET DOOMED? (WSJ)
“Here are two particularly scary forecasts for investors: Goldman Sachs thinks the S&P 500 will make just 3% a year over the next 10 years, as Big Tech dominance eventually falters. Bank of America expects 0%-1% a year for a decade, a catastrophic investment prospect. Their conclusion: Buy stocks anyway, because the next year looks great. The underlying problem is simple to understand, and hard to do much about. Stocks are super expensive on just about every measure. That historically has meant low returns in the long run. Hence the dire 10-year forecasts.” - James Mackintosh, Senior Markets Columnist. Opinion at...
https://www.wsj.com/finance/stocks/stock-market-overvalued-forecasts-2025-e073e1d4
 
THE MOTHER OF ALL BUBBLES (The Felder Report)
“In The Financial Times this week, Ruchir Sharma (chair of Rockefeller International) argues that, “America is over-owned, overvalued and overhyped to a degree never seen before.” Warren Pies points out that, “Wall Street strategists spent 2024 with targets well below the S&P 500. Next year, though, strategists are poised to lift their 2025 targets by 20% (vs 2024 marks) and 11% above the spot S&P 500 (~6,700). This is the largest surge in strategist optimism on record.”.. Mark Hulbert notes that the Value Line Median Appreciation Potential (VLMAP) has now reached an extreme that has been associated with relatively poor equity returns over the following 1-5 years.” Opinion at...
https://thefelderreport.com/2024/12/06/the-mother-of-all-bubbles/
 
MARKETS DIGESTING FOR A NEW BIG RUN (Heritage Capital)
“Markets continue to be a solid footing. Large decline from new highs in December are as rare as the Jets winning the Super Bowl, somewhere around once in a lifetime. One thing to notice is that the market’s rally of late has been more narrow, meaning less stocks participating. You can easily see that with the S&P 500 making new highs while the S&P 400 and Russell 2000 have pulled back. This is not the death knell for the bull market. Rather, if the bull remains super strong, this is one way to correct and work off the excesses before the next big move. If the S&P 500 decides to pull back and the mids and smalls pull back even more, then we have the makings of a bearish change in character. My thesis is that the S&P 500 will pull back and then the mids and smalls will soar again into 2025.” – Paul Schatz, President Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/job-growth-report-should-re-accelerate-markets-digesting-for-new-big-run/
 
MARKET REPORT / ANALYSIS
-Monday the S&P 500 declined about 0.6% to 6053.
-VIX rose about 11% to 14.19.
-The yield on the 10-year Treasury rose (compared to about this time, prior trading day) to 4.197%.
 
MY TRADING POSITIONS:
XLK – Holding since the October 2022 lows.  Added more 9/20.
SSO – added 10/16.
SPY – added 9/19 & more 10/16
QLD – added 11/5.
UWM – added 11/11
 
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
Today, of the 50-Indicators I track, 11 gave Bear-signs and 10 were Bullish. The rest are neutral. (It is normal to have a lot of neutral indicators since many of the indicators are top or bottom indicators that will signal only at extremes.)

The daily Bull/Bear, 50-Indicator spread (Bull Indicators minus Bear Indicators, red curve in the chart above) declined to -1 (1 more Bear indicator than Bull indicators).
 
TODAY’S COMMENT
The “Doomed Stock Market” and “The Mother of All Bubbles” articles above would worry most investors, but as mentioned in the WSJ article, PE is not a good timing indicator. Current PEs may suggest that returns could be miniscule over the next 10-years, as noted in the “Bubble” article, but that would be true only if there was a crash that took markets down 25-50%. In that case, total 10-year returns would be small, because it would take years to recoup the losses. Prior to major crashes, market breadth narrows precipitously, new-high, new-low data get’s funky and other signals are usually visible to careful observers.  I hope to be one of those careful observers to avoid the next major market disruption.  Could we blow it and miss calling a top? Yes, if the market disruption is caused by a sudden world calamity, such as war. Interestingly, one would think that the Corona virus epidemic was not predictable, but the indicators predicted the top, because market participants sniffed out the disaster in advance. The Fosback High/Low Logic Index predicted the Carona virus top to the day.
 
Today’s Bull-Bear spread of -1 is Neutral. The 10-dMA of the 50-Indicator Spread (purple line in the chart above) is moving higher today so that is still bullish. The overall 50-Indicator spread signal is Bullish. (I follow the 10-dMA for trading buy-signals and as an indicator for sell signals.)
 
Monday 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. 
 
There is only 1 top-indicator warning of a top – breadth is too far ahead of the S&P 500. The ensemble of top-indicators is not yet suggesting we need to do anything more than pay attention - so no point in worrying about it yet.
 
As noted earlier, a few down days would be good for the markets so today was healthy for the market.
 
BOTTOM LINE
I’m cautiously bullish.
 
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)
 

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 remained HOLD. (My basket of Market Internals is a decent trend-following analysis that is most useful when it diverges 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 when markets are stretched. (75% is my max stock allocation when I am confident that markets will continue higher.)
 
I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here. When I see bullish signs, I add a lot more stocks to the portfolio, usually by using an S&P 500 ETF as I did back in October 2022 and 2023.