“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The leaders of the Republican Party have made themselves
willing hostages to a man who admits he tried to overturn a presidential election and suggests he would pardon Jan. 6 defendants, some of whom have
been charged with seditious conspiracy."
- Liz Cheney, Republican Congresswoman after an RNC committee voted to
advance a censure targeting Reps. Liz Cheney and Adam Kinzinger Thursday.
PAYROLL REPORT / UNEMPLOYMENT RATE / AVG HOURLY EARNINGS (YahooFinance)
“U.S. employers added back far more jobs than expected in
January even as Omicron cases surged at the beginning of the new year.
The Labor Department released its January jobs
report Friday at 8:30 a.m. ET. Here were the main metrics from
the print, compared to consensus estimates compiled by Bloomberg:
-Non-farm payrolls: +467,000 vs.
+125,000 expected
-Unemployment rate: 4.0% vs.
3.9% expected
-Average hourly earnings, month-over-month: 0.7%
vs. 0.5%
expected
-Average hourly earnings, year-over-year: 5.7%
vs. 5.2% expected” Story at...
ECONOMY STILL LOOKS STRONG – WE’RE BULLISH (CNBC)
Tom Lee (Managing Director, Fundstradt Global Advisors)
was on the CNBC show, Halftime Report.
He talked about the recent waterfall decline in the S&P 500 over a
short amount of time and suggested that the markets were primed for a 13%+
increase over the next 6-months (based on past history of such waterfall dips).
He said, “February will be a rally month.” Hear the audio here...
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.5% to 4501.
-VIX declined about 5% to 23.22.
-The yield on the 10-year Treasury rose to 1.913%.
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 23 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: Now 6.2%; Max intraday: 12% (Avg.= 13% for
non-crash pullbacks)
The S&P 500 is 1.3% above its 200-dMA & 2.6%
below its 50-dMA.
Retracement from bottom: 56% Wednesday.
The slope of the 200-dMA is up.
The Friday run-down of some important indicators improved
a lot from last week but was neutral (10-bear and 10-bull). 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
-The smoothed advancing volume on the NYSE is rising.
-My Money Trend indicator is rising.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 2 February.
-MACD of S&P 500 price made a bullish crossover, 2
February.
-Smoothed Buying Pressure minus Selling Pressure is reversing
higher.
-Short-term new-high/new-low data is rising.
-There have been 5 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This can be a bull or bear. I view
it as bullish now.
-31 January, the 52-week, New-high/new-low ratio improved
by 3.5 standard deviations.
-The Smart Money (late-day action) is bullish. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-57% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-The S&P 500 has had 6 Distribution Days in the last
25-days cancelled by a follow-through day 31 January.
-RSI
-Overbought/Oversold Index (Advance/Decline Ratio)
-Bollinger Bands.
-VIX is rising, but not fast enough to send a signal.
-The S&P 500 is 1.6% 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. (Bigger bottoms are formed when the Index is
at, or below, the 200-dMA.)
-There was a Hindenburg Omen signal on 10 January. It has been cancelled because the McClellan
Oscillator turned positive.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-Non-crash Sentiment indicator is bullish (93%-bulls on a
5-day basis), but not enough to give a sell signal. (Too bullish is bearish.)
-The S&P 500 Index is OK when compared to the issues
advancing on the NYSE (Breadth).
-The NYSE almost had a 90% down volume day on 21
Jan. That would be bearish, particularly
if we have another 90% down-day in this pullback.
-The Fosback High-Low Logic Index is neutral, but has
moved toward bear territory.
-There have been 9 up-days over the last 20 sessions.
-There have been 6 up-days over the last 10 sessions.
-The Calm-before-the-Storm/Panic Indicator.
-2.8% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 3 January. (There is no
bullish signal for this indicator.) This indicates that the advance is too
narrow and a correction from here is likely to be >10%. Looks like this
indicator was correct. - Expired
BEAR SIGNS
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is below 50%.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50%.
-The 100-dMA % of issues advancing on the NYSE
(Breadth) is below 50%
-The 50-dMA % of issues advancing on the NYSE (Breadth)
has been below 50% for 38 consecutive days. (3 days in a row is my bear signal)
-McClellan Oscillator.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both BELOW the 20-dEMA.
-Long-term new-high/new-low data is falling.
-The S&P 500 is under-performing the Utilities
ETF (XLU) over the last 40 sessions.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500 in the short-term.
On Friday, 21 February, 2 days after the top before the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 10 bear-signs and 10 bull-signs. Last week, there were 19 bear-signs
and 2 bull-signs.
I measure Sentiment as %-Bulls (Bulls/{bulls+bears})
based on the amounts invested in selected Rydex/Guggenheim mutual funds. My
Sentiment indicator is finally getting closer to a bearish, buy-zone. That
would be a decent bullish signal if sentiment does go low enough. I won’t get a new value until later tonight.
The daily sum of 20 Indicators improved from +2 to +3 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -7 to +3 (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 indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator
ensemble remained HOLD. Volume is bullish; VIX, Price & Sentiment are
Neutral.
I am cautiously bullish.
The S&P 500 still needs to break back above its 50-dMA. The bulls
don’t want to see the S&P 500 fall below its 200-dMA.
POSITIONS ADDED:
Last week: AAPL; XLE;
Monday: QLD; SPY
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
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 about 65% invested in stocks. This is above my “normal” fully
invested stock-allocation of 50%. I will hold this trading-position for a
while, but it will not be a long-term hold.
I trade about 15-20% of the
total portfolio using the momentum-based analysis I provide here. If I can see
a definitive bottom, I’ll add a lot more stocks to the portfolio using an
S&P 500 ETF.
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.
