“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
JOBLESS CLAIMS (YahooFinance)
“First-time unemployment filings came in lower in the
latest weekly data, continuing a recent downward trend in jobless claims as
Omicron-related pressures on the labor market begin to abate...Initial jobless claims, week ended Feb. 5:
223,000 vs. 230,000 expected; prior week of 238,000 upwardly revised to 239,000.”
Story at...
https://finance.yahoo.com/news/jobless-claims-feb-5-2022-221602181.html
CPI (Reuters)
“U.S. consumer prices rose solidly in January, leading to
the biggest annual increase in inflation in 40 years...The consumer price index gained 0.6% last month
after a similar increase in December.” Story at...
My cmt: Inflation is high and this is about the same as
last month. Doesn’t look like a surprise
to me.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell about 1.8% to 4504.
-VIX jumped about 20% to 23.91.
-The yield on the 10-year Treasury rose to 2.033%. (The
markets didn’t like inflation; they didn’t like this number either.)
Given that most corrections retest their prior lows, I’ll
keep the pullback stats for a while.
Pullback Data:
Days since top: 27 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: Now 6.1%; Max closing: 9.8%; Max intraday:
12% (Avg.= 13% for non-crash pullbacks)
The S&P 500 is 1.2% above its 200-dMA & 2.3%
below its 50-dMA.
Max Retracement from bottom: 56% Wednesday.
The slope of the 200-dMA is up.
The S&P 500 made a double top at 4589 so I was
watching the Russell 2000 to see if the Russell could hold above its prior high
and give us a bullish sign.
The Russell 2000 had broken out of its range to continue
an up-trend. Thursday, I didn’t want to see the Russel 2000 fall below its
prior high of 2051. It closed at 2051. If it can’t stay above the 2051 level,
it suggests that it may slide backwards and test lower levels, possibly the 27
January low. That could pull other indices
lower - not a good thought.
I thought we were out of the woods, but the inflation
numbers spooked the markets and the S&P 500 futures fell immediately after
the release.
I sold my QLD position in the morning when there was a
clear head-and-shoulders pattern on a number of charts. With an ETF that
doubles the market moves, its best to take a profit rather than hang on and risk
a loss. I didn’t cut any other positions.
We were headed for a statistically significant day. As it turned out, today
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 so I may be better off
selling tomorrow or hanging on if the indicators look OK. The Friday run down may be telling.
If tomorrow isn’t up, I’ll probably sell some more
positions.
In spite of the nasty day, Indicators didn’t change much.
The daily sum of 20 Indicators declined from +6 to +5 (a positive number is
bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily
fluctuations improved from +32 to +43 (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 to HOLD. Volume is bullish; VIX, Price & Sentiment are
Neutral.
I’m neutral now – let’s see what happens tomorrow. I don’t
think the inflation numbers should have affected the market as much as today's drop would indicate, but rather than
guess what Mr. Market thinks, let’s follow the market tomorrow and see.
POSITIONS ADDED:
Wednesday, 26 January: AAPL; XLE;
Monday, 31 January: QLD; SPY
POSITIONS SOLD: QLD 10 February.
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
THURSDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained Buy.
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 probably still 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.
