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

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” - Peter Lynch, former manager of Fidelity’s Magellan® fund.
 
"This is maybe the most dangerous market of my career, and that includes 1987's crash, that includes the savings and loan debacle market of the early '90s, that includes the 1999 to 2009 lost decade in the S&P 500 in the dot-com bubble. This is the most difficult market of my 45 years." -  Bill Smead, Smead Value Fund (SMVLX), May 2025.
 
SHILLER’S CAPE AT A VERY HIGH LEVEL (McClellan Financial Publications)
 

“The [above] chart compares the CAPE ["Cyclically Adjusted P/E Ratio"] to a measure of 10-year forward price returns for the SP500 (dividends not included).  I have inverted the scaling on that plot of forward returns to better show the strong correlation.  And the plot of forward returns ends in 2015 because the market has not yet told us what the 10-year forward returns after then are going to look like... The big peaks in CAPE in 1929 and 2000 led to instances of negative 10-year returns.  So did the lesser CAPE peak in 1965...
... This means that the potential for a buy and hold approach working well over the next 10 years is going to be pretty low.” – Tom McClellan. Excerpted from....
https://www.mcoscillator.com/learning_center/weekly_chart/shillers_cape_at_very_high_level/
My cmt: That’s the point of this blog. I won’t be holding during a downturn and the indicators have been very good at identifying tops. We can hope that the trend of correct calls at major tops will continue. Unfortunately, there are no guarantees.

“Harley Schwadron is a cartoonist in Ann Arbor, Michigan. His cartoons have appeared in many major publications, including Barron’s, Harvard Business Review, Punch, Playboy, American Legion, New York Times, and Readers Digest. Many of Harley's cartoons deal with business, politics and financial investing. He has illustrated some 50 books.” From...
Political Cartoons From Harley Schwadron
 
TIME RUNNING OUT ON HEALTH SUBSIDIES – Excerpt (WSJ)
“The window for extending billions of dollars in Americans’ healthcare subsidies is closing rapidly. Enhanced Affordable Care Act subsidies are set to end after this year unless Congress acts, and open enrollment for insurance next year By Lindsay Wise, Anna Wilde Mathews and Katy Stech Ferek starts next month. Democrats have demanded that Republicans negotiate on extending the subsidies as a condition for ending the government shutdown, now in its third full week.” – WSJ Front Page.
https://www.wsj.com/public/resources/documents/94xXfOHegeoeeh4wpCBm-WSJNewsPaper-10-20-2025.pdf
My cmt: Payments to Health Insurers’ (subsidies) were designed to lower health care premiums during COVID in the Obama Care insurance programs. The subsidies were not intended to be permanent.  They expire after 2025. (Not already expired as I recently mentioned.) But Politicians hate to take away any benefit once established. So far Republicans haven’t blinked as the Democrats try to blame Republicans for the shutdown.
 
LEADING ECONOMIC INDICATORS (Conference Board)
While not a government institution, the Board is not able to publish the LEI due to the lack of Government data.
 
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was unchanged at 6735.
-VIX fell about 2% to 17.87.
-The yield on the 10-year Treasury declined to 3.963% (compared to about this time prior market day).
 
MY TRADING POSITIONS:
SPY – Added 8/26/2025
XLK – Added 8/26/2025
 
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
Today, of the 50-Indicators I track, 6 gave Bear-signs and 15 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.)

TODAY’S COMMENT
The daily, bull-bear spread of 50-indicators improved from -1 to +9 (9 more Bull indicators than Bear indicators), a Bullish indication. I consider +5 to -5 the neutral zone. The 10-dMA curve of the spread smooths daily fluctuations; it reversed higher, a Bullish sign.
 
It looks like the market is improving beneath the surface of the major indices. Absent further Tariff turmoil, I’ll add to stock holdings...slowly. Further, I’ll wait for the S&P 500 to be showing strength i.e., moving higher. Indicators aren’t always a full green light, so I’ll want to see confirmation in price.
 
The good news is that S&P 500 is at its lower trendline suggesting it as room to run higher.
 
BOTTOM LINE
I’m Bullish.  Seems like it’s been a while since I wrote those words without qualification.
 
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
 
TUESDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals improved to Neutral. (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 50% stocks, including stock mutual funds and ETFs.
50% invested in stocks is a normal, conservative position for a retiree. (75% is my max stock allocation when I am confident that markets will continue higher; 30% in stocks is my Bear market position.)
                                             
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.