“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"There are lots of structural changes going on in
the post-pandemic economy ... you can't simply dismiss them as transitory...it
is going to go down in history as one of the worst inflation calls by the
Federal Reserve." - Mohamed El-Erian, President of Queens' College,
Cambridge University, part-time Chief Economic Advisor at Allianz and Chair of
Gramercy Fund Management.
JOLTS JOB OPENINGS (Business Insider)
“The number of open jobs in the US fell again in
September, but numbers are still high and people are still quitting at record
rates, signaling the labor shortage charged on into the fall. US openings fell
to 10.4 million from 10.6 million in September...” Story at...
UNIV OF MICHIGAN SENTIMENT (Univ of Michigan)
“Consumer sentiment fell in early November to its lowest
level in a decade due to an escalating inflation rate and the growing belief
among consumers that no effective policies have yet been developed to reduce
the damage from surging inflation. One-in-four consumers cited inflationary
reductions in their living standards in November, with lower income and older
consumers voicing the greatest impact... The description that inflation would
be "transient" has the undertone that consumers could "grin and
bear it" as economic policies counted on a quick and automatic
self-correction to supply and labor shortages. Instead, the pandemic caused
economic dislocation unlike any prior recession, and has been intertwined with
partisan interpretations of economic developments.” Report at...
PULLBACK COMING BUT BEARS WON’T BE HAPPY – EXCERPT
(Heritge Capital)
“...those misguided folks who argue, yet again, that
there is a “bubble” out there might want to check...the New York Stock Exchange
Advance/Decline Line. As you have heard me state countless times over the
years, bubbles are generational. We had one 21 years ago. A handful of stocks
went parabolic while the masses were already in serious decline. This is the
exact opposite of what we have today. The NYSE A/D Line continues to score new
high after new high. Hello continuation of the bull market!” – Paul Schatz, President heritage Capital.
https://investfortomorrow.com/blog/pullback-coming-but-bears-wont-be-happy/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 PM Friday. U.S. total case numbers are on the left axis; daily numbers
are on the right side of the graph in Red with the 10-dMA of daily numbers in
Green. I added the smoothed 10-dMA of new cases (in purple) to the chart.
Trend numbers remain essentially flat. At this point, we
worry that the new cases may start rising, but it is too soon to make a call
either way.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.7% to 4683.
-VIX fell about 8% to 16.29.
-The yield on the 10-year Treasury rose to 1.566%.
I mentioned yesterday that “When daily variability of
price-volume moves becomes very small (Calm-Before-the-Storm indicator), it
suggests a significant drop in the market is coming. By significant, I mean a
move down greater than 1%, often followed by further downside.” To clarify, I
was referring to a significant 1-day drop of 1 to 3%, not a total move. Usually,
there’s more downside afterward.
The Calm-Before-the-Storm indicator flashed a warning
again today. That suggests a big one-day
move down is coming, but the timing is essentially unknown. It could be tomorrow; it could be more than
a month from now, so I won't make any more portfolio changes based on this one indicator.
The Friday run-down of some important indicators remains
on the bull side (3-bear and 13-bull) a little weaker than last week. These
indicators tend to be both long-term and short-term, so they are different than
the 20 that I report on daily. Details follow:
BULL SIGNS
-VIX is falling sharply.
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is above 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA % of issues advancing on the NYSE
(Breadth) is above 50%.
-McClellan Oscillator.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA
are both above the 20-dEMA.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500, but the curve is rising so this goes in the bull category.
-Slope of the 40-dMA of New-highs is up. This is one of
my favorite trend indicators.
-Long-term new-high/new-lows are rising.
-My Money Trend indicator is rising.
-The smoothed advancing volume on the NYSE is rising.
-The S&P 500 is out-performing the Utilities ETF
(XLU).
-61% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Non-crash Sentiment indicator is leaning bearish, but
not enough to send a bullish signal.
-There was a Hindenburg Omen signal 28 September. The McClellan Oscillator turned positive afterward,
so the Omen has been cancelled.
-There have been 4 Statistically-Significant days in the
last 15-days – too low to send a signal. This can be a bull or bear.
-Bollinger Bands
-MACD of S&P 500 price made a bullish crossover, 13
October, but it is falling sharply and is very close to a bearish cross. Let’s
call it neutral for now.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-7.9% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 8 November. (There is no
bullish signal for this indicator.) This is above average for all-time highs and
it suggests that if we do have a pullback, it is likely to be less than 10%.
-The S&P 500 is 10.1% above its 200-dMA (Bear
indicator is 12%.). This value was 15.9% above the 200-dMA when the 10%
correction occurred in Sep 2020.
-The Fosback High-Low Logic Index is neutral.
-Statistically, the S&P 500 gave a panic-signal 17
Sept. Signal has expired.
-3 November, the 52-week, New-high/new-low ratio improved
by 0.91 standard deviations, somewhat bullish, but Neutral.
-Overbought/Oversold Index (Advance/Decline Ratio) is Neutral.
-Short-term new-high/new-low data is trending flat.
-The size of up-moves has been larger than the size of
down-moves over the last month, but not enough to send a signal.
-There have been 8 up-days over the last 10-sessions –
Neutral.
-RSI was overbought (>80) for almost 3 weeks. Now, it
is 73, neutral.
-The S&P 500 had a Distribution Day 10 November, but
it’s only 1 – Neutral.
-The Smart Money (late-day action) is flat, a neutral
indication. (This indicator is based on the Smart Money Indicator developed by
Don Hayes).
BEAR SIGNS
-There have been 16 up-days over the last 20 sessions - Bearish
-The Calm-before-the-Storm Indicator warned Thursday and
Friday.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bearish crossover 11 November.
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 3 bear-signs and 13 bull-signs. Last week, there were 3 bear-signs and 17
bull-signs.
There are now no topping indicators issuing warnings. At the recent top on 8 November, there was
only 1 top indicator, RSI, that was warning.
Today was a statistically significant up-day. That just means
that the price-volume move exceeded my statistical parameters. Statistics show
that a statistically-significant, up-day is followed by a down-day about 60% of
the time.
The daily sum of 20 Indicators improved from -3 to zero
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +20 to +25 (These numbers sometimes
change after I post the blog based on data that comes in late.) Most of these
indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator
ensemble remained HOLD. Price, Volume, Sentiment and VIX indicators are neutral.
The number of up-days over the last 20-days remains bearish. This has sometimes
indicated a major top – this time, I am not convinced.
I am cautiously bullish.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
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
** XLE has outgained XLY over
the last 2 months so I am still holding XLE rather than switching too XLY.
TODAY’S RANKING OF THE DOW 30
STOCKS (Ranked Daily)
Here’s the revised DOW 30 and
its momentum analysis. 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
FRIDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained HOLD.
Market Internals are a decent
trend-following analysis of current market action, but should not be used alone
for short term trading. They are usually right, but they are often late. They are most useful when they diverge from
the Index.
My stock-allocation in the portfolio
is now about 50% invested in stocks; this is my “normal” fully invested stock-allocation.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees.
As a general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
