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Tuesday, January 10, 2023

NFIB Small Business Optimism ... Best DOW Stocks ... Best ETFs … Stock Market Analysis

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

“For decades we disagreed with [Supreme] Court rulings when progressives held sway, but we never called the Court illegitimate. But now that the left has lost the Court as a backup legislature for its policy goals, the institution is supposedly broken. Tell us again who is the threat to democratic institutions?” – WSJ Editorial Board.

NFIB SMALL BUSSINESS OPTIMISM (NFIB)
“The NFIB Small Business Optimism Index declined 2.1 points in December to 89.8, marking the 12th consecutive month below the 49-year average of 98. Owners expecting better business conditions over the next six months worsened by eight points from November to a net negative 51%. Inflation remains the single most important business problem with 32% of owners reporting it as their top problem in operating their business...The net percent of owners raising average selling prices decreased eight points from November to a net 43% seasonally adjusted, the lowest level since May 2021...A net 24% (seasonally adjusted) of owners plan price hikes, down 10 points from November.” Press release at...
https://www.nfib.com/content/press-release/economy/small-business-optimism-declines-as-expectations-for-better-business-conditions-worsens-in-december/
My cmt: Looks like the NFIB press release may be providing more confirmation that inflation is dropping, but I am not an expert at reading these tea leaves.

MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.7% to 3919.
-VIX dropped about 6% to 20.58
-The yield on the 10-year Treasury rose to 3.621%.

PULLBACK DATA:
-Drop from Top: 18.3% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 256-days.
The S&P 500 is 1.8% BELOW its 200-dMA & 0.3% ABOVE its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.
XLK – Technology ETF. (I now have a small profit in XLK.)
SSO – 2x S&P 500. (My indicators are improving.)
XLE – Energy Sector ETF. Low PE; good Dividend; decent momentum.

TODAY’S COMMENT:
The market is telling us to get more bullish. New-lows are falling a lot. At the October low there were 464 new 52-week lows on the NYSE. Two weeks ago, there were over 200. Yesterday there were 9 new-lows. Today; 6.

Today, (Tuesday) unchanged volume was high. As I’ve often said, many believe that this indicator suggests investor confusion at market turning points. My problem is that it is frequently a false signal. Not much happened the last time we saw this indicator, but the S&P 500 is near its lower trendline and its 50-dMA. It has also gone sideways for more than a month; Looks like a bullish sign to me.

I am still watching the 50-dMA...
The S&P 500 closed 0.3% above its 50-dMA today, Tuesday. A second close above the 50-dMA would be a very bullish sign. I got a buy-signal 27 September. The main reason I took profits after the buy-signal and reduced stock holdings was because the S&P 500 trended below its 50-day moving average. That negative sign seems to be fading.

Indicators looked good today so I added XLE (Energy Select Sector) to the portfolio. (I don’t like Asia stocks as a matter of principle so EAFE is not on my list even though it is one of the higher momentum ETFs. I am suspicious that the ITA (Aerospace & Defense) will not be able to remain the top momentum play.)

Today, the daily sum of 20 Indicators slipped from +13, but remains a very bullish +12 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +69 to 76. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator slipped to HOLD: PRICE is positive; VOLUME, VIX & SENTIMENT are neutral. I am not concerned over this change; it’s more about what happened to VIX in the past than currently. That’s the nature of moving averages. For now, VIX is still falling.

Bottom line: I’m a cautious BULL at this point. I am fully invested in the markets, but not overly so. There was a successful test and buy signal 27 September, so I need to be fully invested given improving signals. I’ll boost stock holdings further if the S&P 500 can close above its 50-dMA on consecutive days (i.e., again tomorrow.)

I’m now have about 55% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December and I’ll get there again if conditions look right.

BEST ETFs - 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

BEST DOW STOCKS - TODAY’S MOMENTUM RANKING OF THE DOW 30 STOCKS (Ranked Daily)
DOW 30 momentum ranking follows:

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 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 most useful when they diverge from the Index.)

...My current invested position is about 55% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. Last week’s Friday-run-down indicator ensemble was bullish and daily signs are improving too.

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.

Monday, January 9, 2023

Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

"If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy...This is the biggest bubble I've seen in my career." - Stanley Druckenmiller, billionaire investor. (27 July 2021, back when the CPI was around 3.0.)

SANTA DID CALL – 2023 SHOULD BE GOOD FOR ALL (Heritage Capital)
“I proclaim 2023 as the year of the bull. Stocks and bonds both end green and perhaps strongly so. There’s even a scenario for the S&P 500 to be up 20%+. Stay tuned…stocks have not started the year with any oomph or bang or conviction. The market looks like it wants to have a short-term resolution to the downside next week [week of 9 Jan] before Q4 earnings season begins. That could be an opportune time to buy.” – Paul Schatz. Commentary at...
https://investfortomorrow.com/blog/santa-did-call-2023-should-be-good-for-all/

MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 0.1% to 3892.
-VIX rose about 4% to 21.97
-The yield on the 10-year Treasury slipped to 3.533%.

PULLBACK DATA:
-Drop from Top: 18.9% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 255-days.
The S&P 500 is 2.5% BELOW its 200-dMA & 0.3% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.

XLK – Technology ETF. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)

SSO – 2x S&P 500. (My indicators are improving.)

TODAY’S COMMENT:
As I’ve noted before, one of the simplest indicators for determining oversold / overbought conditions is simply counting the number of up-days in a given stretch of time. I report these numbers every Friday for the most recent 10- and 20-day periods. Friday there had been 9 up-days in the last 20 trading-days and 4 up-days in the last 10-days. That’s a neutral sign based on my analysis.

What I don’t usually report is the 100-day period. A number less than 47 up-days in 100 days is generally an oversold signal (again, my analysis), but as often stated, oversold conditions can remain for a long time. The first reading in the current correction that was less than 47 occurred a few days before April Fool’s day, about 6-months before the bottom.

It’s curious now though; as of today, there have only been 39 up-days in the last 100-days. That’s even lower than we saw in the great Recession and it matches the lowest during the 2000-2002 Dot.com crash.

The point of this analysis is to point out that investors are now more freaked out than they were during the Great Recession when the S&P 500 fell 57%; we have also now matched the low for this stat in the 2000-2002 Dot.com crash when the S&P 500 fell 49%.

In 2009 the lowest value occurred 3.5 months before the bottom and about 10% above the bottom. By that measure, the S&P 500 would drop about 10% from today’s close or about 3500 on the S&P 500. If that did happen to be a final low, that would be about 7% below the October lows...

...However, this is not a prediction! I think the bottom was 3577, or there about based on previous market action.

I am still watching the 50-dMA...
The S&P 500 climbed well above its 50-dMA Monday, but was (again) unable to stay there. We want the S&P 500 above its 50-dMA to feel bullish.

We noted that on Friday, up-volume was greater than 80% of the total volume and if Monday was another high, up-volume day (>80%) it would be a nice sign for the bulls. That didn’t happen. Up-volume outpaced down-volume, Monday, a good sign, but up-volume was about 60% of the total, not enough to give us a strong bullish sign.

Today, the daily sum of 20 Indicators improved from +11 to +13 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +59 to 69. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator improved to BUY: PRICE & VIX are positive; VOLUME & SENTIMENT are neutral. (The important BUY in this indicator was on 21 October, 7-days after the bottom. The NTSM buy-signal was 27 September, based on improved internals at the retest low.)

Bottom line: I’m a milld Bear at this point. I am defensively positioned in the markets, but not drastically so. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish. I added a trading position in SSO on 1/9, based on improving market indicators.

I’m now have about 45% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.

BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

BEST DOW STOCKS - TODAY’S MOMENTUM RANKING OF THE DOW 30 STOCKS (Ranked Daily)
DOW 30 momentum ranking follows:

MONDAY MARKET INTERNALS (NYSE DATA)

...My current invested position is about 45% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. Last week’s Friday-run-down indicator ensemble was bad enough to convince me to take a more conservative view of the markets.

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.

Friday, January 6, 2023

Unemployment ... Payroll Report ... Factory Orders ... ISM ... DOW Stocks ... ETFs … Stock Market Analysis

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

PAYROLL REPORT / UNEMPLOYMENT REPORT / AVG HOURLY EARNINGS
“Nonfarm payrolls increased by 223,000 in the last month of the year, according to the latest from the BLS published Friday. The unemployment rate in December fell to 3.5%...the lowest since 1969...On an annual basis, wages rose 4.6% in December, a slower pace than the 4.8% seen during the prior month.” Story at...
https://finance.yahoo.com/news/december-jobs-report-january-6-2023-125423740.html

FACTORY ORDERS (Yahoo Finance)
“New orders for U.S.-manufactured goods fell more than expected in November amid a sharp decline in bookings for aircraft, while higher borrowing costs cooled demand for other goods. The Commerce Department said on Friday that factory orders dropped 1.8%...” Story at...
https://finance.yahoo.com/news/u-factory-orders-tumble-november-152325805.html

ISM NON-MANUFACTURING (ISM via PRnewswire)
“The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: "In December, the Services PMI® registered 49.6 percent, 6.9 percentage points lower than November's reading of 56.5 percent. The composite index contracted for the first time since May 2020, when it registered 45.2 percent.” Press release at...
https://www.prnewswire.com/news-releases/services-pmi-at-49-6-december-2022-services-ism-report-on-business-301715010.html

MARKET REPORT / ANALYSIS
-Friday the S&P 500 jumped up about 2.3% to 3895.
-VIX fell about 6% to 21.13
-The yield on the 10-year Treasury dropped to 3.563%.

PULLBACK DATA:
-Drop from Top: 18.8% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 254-days.
The S&P 500 is 2.5% BELOW its 200-dMA & 0.2% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.

XLK – Technology ETF. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)

TODAY’S COMMENT:
Markets cheered the lower inflation rate inferred in the hourly wage data in today’s payroll report. On a yearly basis, hourly earnings inflation dropped from 4.8% to 4.6%, but there is a scary stat in plain view. In MBA school they taught that the lowest possible unemployment rate was 4%. A rate of 3.5% unemployment implies a very hot economy and, to me, is worrisome for future Fed actions regardless of what inflation is doing. I’ll caution that I am not an economist so what do I know? Let’s see what the markets do next week.

The S&P 500 climbed a point or 2 above its 50-dMA, but was unable to stay there.

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.

Friday, up-volume was greater than 80% of the total volume. If Monday is another high, up-volume day (>80%) it would be a nice sign for the bulls, suggesting more gains ahead.

On Fridays, I summarize a number of indicators to get a weekly feel for trend. The Friday rundown of indicators improved and shifted bullish (6-bear and 11-bull). These indicators tend to be both long-term and short-term, so they are different than the 20 that I report on daily.

BULL SIGNS
-Today, Friday, was a Follow-thru day and that cancels prior Distribution Days.
-The smoothed advancing volume on the NYSE is increasing.
-The 10-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%. (It’s about time for this one.)
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) is above 50%.
-My Money Trend indicator is improving.
-Short-term new-high/new-low data.
-Long-term new-high/new-low data.
-McClellan Oscillator.
-VIX indicator. (VIX is falling fast enough to be bullish.)
-XLI-ETF (Cyclical Industrials) is outperforming the S&P 500.
-The 5-day EMA is above the 10-day EMA so short-term momentum is bullish.

NEUTRAL
-There have only been 3 Statistically-Significant days (big moves in price-volume) in the last 15-days.
-Sentiment.
-Bollinger Bands.
-RSI
-Overbought/Oversold Index (Advance/Decline Ratio).
-Issues advancing on the NYSE (Breadth) compared to the S&P 500.
-The short-term, 10-day, Fosback Hi-Low Logic Index.
-The longer-term, 50-dEMA, Fosback Hi-Low Logic Index is neutral.
-The graph of the 100-day Count (the 100-day sum of up-days) has flattened.
-There have been 4 up-days over the last 10 sessions – neutral.
-There have only been 9 up-days over the last 20 sessions.
-The Smart Money (late-day action) is mixed.
-On average, 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.
-The 50-dMA percentage of issues advancing on the NYSE (Breadth) has been above 50%, for 3 days in a row ending the “correction-now” signal.
- 90% down-volume days - the last one was 5 Dec. - neutral. (There has been a 90% up-volume day since then but it did not meet all of the tests fr a bullish 90% up-volume day.
-The Calm-before-the-Storm/Panic Indicator flashed a panic-buying signal 10 November - expired.
-The S&P 500 is 2.5% below its 200-dMA. (Bull indicator is 12% below the 200-day, although this is based on “normal” pullbacks.)
-There was an Inverse Zweig Breadth Collapse (negative Breadth Thrust) 21 June. That’s a rare, very-bearish sign, but it was a long time ago - expired.
-There was a Hindenburg Omen signal 8 April – expired.
-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 2022. (There is no bullish signal for this indicator.) This indicated that the advance was too narrow and a correction was likely to be >10%. It proved correct, but is now Expired
-The 52-week, New-high/new-low ratio improved by 3.5 standard deviations. More simply, the spread between new-highs and new-lows improved by 716 on 14 October. That’s a solid bottom sign at a retest. – Expired.
-13 & 21 Oct were Bullish Outside Reversal Days with no Bearish Outside Reversal days since then - expired.
-Slope of the 40-dMA of New-highs is flat.
-Only 49% of the 15-ETFs that I track have been up over the last 10-days.

BEAR SIGNS
-The 100-dMA percentage of issues advancing on the NYSE (Breadth) is below 50%
-MACD of the percentage of issues advancing on the NYSE (breadth) made a bearish crossover 15 Dec. although it has been improving.
-Smoothed Buying Pressure minus Selling Pressure is falling.
-MACD of S&P 500 price made a bearish crossover 6 Dec. although it has been improving this week.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA are both below the 20-dEMA.
-S&P 500 is underperforming the Utilities (XLU.

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 6 bear-sign and 11-Bull. Last week, there were 13 bear-sign and 9 bull-signs.

We see more bullish signs today. Still, the 50-dMA remains the key for me; if the S&P 500 can climb above its 50-dMA and remain for consecutive days, I’ll be adding to stock holdings.

Today, the daily sum of 20 Indicators improved from +9 to +11 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +57 to 59. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator remained HOLD: VIX is positive; VOLUME, PRICE & SENTIMENT are neutral.

Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish.

I’m now have about 40% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.

BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

..My current invested position is about 40% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. Last week’s Friday-run-down indicator ensemble was bad enough to convince me to take a more conservative view of the markets.

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.

Thursday, January 5, 2023

Jobless Claims ... ADP employment ... Crude Oil Inventories ... Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

"The Clown Show continues in Congress." – Michael Ramirez.

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

ADP EMPLOYMENT ADP (ADP)
“Private employers added 235,000 jobs in December.
Job resurgence was seen in the last two months of 2022 led by consumer-facing service industries. Hiring was strong across small and medium establishments while large establishments saw a drop in employment of 151,000 jobs.” Story at...
https://adpemploymentreport.com/

JOBLESS CLAIMS (CNN)
“Around 204,000 people applied for first-time unemployment benefits last week, according to the latest data from the Bureau of Labor Statistics. That’s down from the previous week’s total jobless claims and only slightly below the pre-pandemic weekly average of 218,000.” Story at...
https://www.cnn.com/2023/01/05/economy/weekly-jobless-claims-december-31/index.html

EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. At 420.6 million barrels, U.S. crude oil inventories are about 4% below the five year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf

MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell about 1.2% to 3808.
-VIX rose about 2% to 22.46
-The yield on the 10-year Treasury rose to 3.719%.

PULLBACK DATA:
-Drop from Top: 20.6% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 253-days.
The S&P 500 is 4.8% BELOW its 200-dMA & 2.4% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.

XLK – Technology ETF. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)

TODAY’S COMMENT:
The Junk Bond spread is showing bullish divergence; My Money Trend indictor turned up; New-Hi/New-lo data is improving. Perhaps this downtrend will take a break? Let’s wait until tomorrow and see what the Friday summary of many of the NTSM indicators tells us.

The S&P 500 is about 5% above its October closing low and the S&P 500 remains below its 50-dMA. I still think that the most likely scenario will see the S&P 500 test its prior correction low.

The 50-dMA is the key for me; if the S&P 500 can climb above its 50-dMA and remain for consecutive days, I’ll be adding to stock holdings.

Today, the daily sum of 20 Indicators declined from +12 to +9 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +54 to 57. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator remained HOLD: VIX, VOLUME, PRICE & SENTIMENT are all neutral.

Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish.

I’m now have about 40% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.

BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

...My current invested position is about 40% stocks, including stock mutual funds and ETFs. I’m usually about 50% invested in stocks. Last week’s Friday-run-down indicator ensemble was bad enough to convince me to take a more conservative view of the markets.

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.

Wednesday, January 4, 2023

FOMC Minutes ... ISM Manufacturing ... JOLTS Job Openings ... Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

“Base case until proven otherwise is ongoing bear.” – Chris Ciovacco, Ciovacco Capital.

FOMC MINUTES (CNBC)
“Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time,” the meeting summary stated. “In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy.” Story at...
https://www.cnbc.com/2023/01/04/fed-minutes-december-2022-.html

ISM MANUFACTURING INDEX (ISM via prnewswire)
"The December Manufacturing PMI® registered 48.4 percent, 0.6 percentage point lower than the 49 percent recorded in November. Regarding the overall economy, this figure indicates contraction after 30 straight months of expansion. The Manufacturing PMI® figure is the lowest since May 2020, when it registered 43.5 percent.” Press release at...
https://www.prnewswire.com/news-releases/manufacturing-pmi-at-48-4-december-2022-manufacturing-ism-report-on-business-301712602.html

JOLTS JOB OPENINGS (CNN)
“The number of available jobs in the United States totaled 10.46 million in November, according to data released Wednesday by the Department of Labor... There were still about 1.7 job openings for each job seeker in November, unchanged from October, according to data from the Bureau of Labor Statistics.. Although openings came in above expectations, the JOLTS report likely won’t spur a dramatic change in course from the Fed...” Story at...
https://www.cnn.com/2023/01/04/economy/jolts-november-job-openings-and-quits/index.html

MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 0.8% to 3853.
-VIX dipped about 4% to 22.01
-The yield on the 10-year Treasury slipped to 3.687%.

PULLBACK DATA:
-Drop from Top: 19.7% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 252-days.
The S&P 500 is 3.7% BELOW its 200-dMA & 1.3% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.

XLK – Technology ETF. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)

TODAY’S COMMENT:
New highs outpaced new-lows again today. That’s a good sign that hadn’t happened until yesterday.

Indicators are getting more bullish, but the S&P 500 remains below its 50-dMA. I still think that the most likely scenario will see the S&P 500 test its October lows, about 6% below today’s close.

The 50-dMA is the key for me; if the S&P 500 can climb above its 50-dMA and remain for consecutive days, I’ll be adding to stock holdings.

Today, the daily sum of 20 Indicators improved from +11 to +12 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +45 to 54. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator remained HOLD: VIX, VOLUME, PRICE & SENTIMENT are all neutral.

Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish.

I’m now have about 40% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.

BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

Tuesday, January 3, 2023

Manufacturing PMI ... Construction Spending ... Best DOW Stocks ... Best ETFs … Stock Market Analysis ...

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

“Base case until proven otherwise is ongoing bear.” – Chris Ciovacco, Ciovacco Capital.

HIS MARKIT MANUFACTURING PMI (S&P Global)
“Manufacturing firms in the US indicated a solid decline in the health of the sector during December, according to the latest PMITM data from S&P Global... The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI™) posted 46.2 in December, down from 47.7 in November, but matched the earlier released 'flash' estimate. The latest data signalled the fastest decline in operating conditions since May 2020, and was among the sharpest since 2009.” Press release at...
https://www.pmi.spglobal.com/Public/Home/PressRelease/fd49c3c51d79418b9622ad78993a762b

CONSTRUCTION SPENDING (Trading Economics)
“Construction spending in the United States rose 0.2% month-over-month in November of 2022, rebounding from the downwardly revised 0.2% decline in the previous month and compared to market estimates of a 0.4% contraction. Spending on private construction rose by 0.3% from the prior month, offsetting the 0.1% decline in public construction spending.” Story at...
https://tradingeconomics.com/united-states/construction-spending

3^RD YEAR OF PRESIDENTIAL TERM IS SUPPOSED TO BE BULLISH (McClellan Financial Publications)
“During a typical 4-year presidential term, the stock market tends to be flattish during the first 2 years. Then the third year is nearly always an up year...[but] In physics terms, there is always a “balance of forces equation”. The motion of the object or particle in question depends on the sum of all of those forces. For 2023, we have the bullish force of the third year of a presidential term being met by the bearish forces of Fed rate hikes AND Fed QT. If ever there were a condition under which the bullish tendency of the third year might not work, this is that time.” Commentary at...
https://www.mcoscillator.com/learning_center/weekly_chart/3rd_year_of_presidential_term_is_supposed_to_be_bullish/

MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped about 0.4% to 3825.
-VIX rose about 6% to 22.87
-The yield on the 10-year Treasury slipped to 3.773%.

PULLBACK DATA:
-Drop from Top: 20.3% as of today. 25.4% max (on a closing basis).
-Trading Days since Top: 251-days.
The S&P 500 is 4.5% BELOW its 200-dMA & 2% BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500 makes a new-high; however, evidence suggests the bottom was in the 3600 area.

MY TRADING POSITIONS:
I am doing less trading now. You may do better watching the momentum charts rather than my moves.

XLK – Technology ETF. (The S&P 500 is not far from its prior lows so I am holding this position, even though it is now a losing one.)

TODAY’S COMMENT:
New highs outpaced new-lows today. That’s a good sign that hasn’t happened in a while. On the other hand, Tuesday was another Distribution Day and that reinforces the bear scenario.

It still appears that the most likely scenario will see the S&P 500 test its October lows, about 5% below today’s close.

Today, the daily sum of 20 Indicators improved from +7 to +11 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations increased from +35 to 45. (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 20 indicators are short-term so they tend to bounce around a lot.

LONG-TERM INDICATOR: The Long Term NTSM indicator remained HOLD: VIX, VOLUME, PRICE & SENTIMENT are neutral.

Bottom line: I’m a Bear at this point. I am defensively positioned in the markets, but not drastically so. The 50-dMA is the key for me; if the S&P 500 can climb above its 50-dMA and remain for consecutive days, I’ll be adding to stock holdings. There was a successful test and buy signal 27 September, so I need to be careful not to get too bearish. Perhaps cautious is a better word than bearish.

I’m now have about 40% of the portfolio invested in stocks. (As a retiree, 50% invested in stocks is my “normal” portfolio.) I was 75% invested in stocks in early December.

BEST ETFs - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
ETF ranking follows:

BEST DOW STOCKS - TODAY’S MOMENTUM RANKING OF THE DOW 30 STOCKS (Ranked Daily)
DOW 30 momentum ranking follows:

TUESDAY MARKET INTERNALS (NYSE DATA)

My basket of Market Internals improved to 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 most useful when they diverge from the Index.)