Old Skeet's Barometer Report

[uncleharley]

GDP confirmed that the economy is strong with a 3.3% rise in the 4th qtr. XLF & XLK continue to confirm that the Financial Services & Tech sectors are leading the economy. The weekly chart for Dr copper is stuck in a band of resistance/support. My thought is that Dr Copper breaks for the top next week, signaling that manufacturing is doing well also.

[oldskeet]

Hi guys. Not feeling my best today and moving a little slow so this post is behind schedule.

Congress was able to only pass the Third Continuing Resolution this past week to prevent a Government shutdown. However, since no long-term solution was forthcoming the yield on the US10YrT has moved, since the first of January, from 3.87% to 4.16% for a gain of 7.5%.

For the S&P 500 Index it reached a new all time high during January and closed Friday with a reading of 4891 for a year to date gain of 2.5%. It began the year with a reading of 4770.

On the Win, Place & Show Leadership Investment Strategy the Win with a track score of 26.83 goes to QQQ, Place (SPY) came in with a score of 21.1 and Show (EWJ) came in with a score of 18.94. All three have had positive momentum thus far this year.

For me, my favored sectors are Technology, Heath Care, Financials and Industrials. Combined they account for about 55% of my equity allocation.

It will be interesting to see how stocks continue to perform once we have moved through earning season.

Thanks for stopping by and reading.

Old_Skeet

Additional comment:  For the week ending of January 26, the Barometer scores the Index with a reading of 77, overvalued.

[mani]

Everybody is asleep at the wheel or on vacation spending last year's gains? Interesting developments today. When are we breaking 5000?

[archer]

Today was a case of bought on the rumor sell on the news.

[FD1000]

Feb 1, 2024 1:27:48 GMT archer said:

Today was a case of bought on the rumor sell on the news.

Maybe, or maybe after 20% increase for the SP500 since the last bottom in 11/2023, the SP500 took a smaller breather and it's only less than 2% from the last top.

[yogibearbull]

AAII Bull-Bear Spread +24.6% (high; improved)

%Above 50-dMA for NYSE 58.89% (positive but declining)

%Above 50-dMA for SP500 66.00% (now positive only & declining)

Fed held rates but isn't in a rush to cut. Sentiments have been slipping since mid-December.

[uncleharley]

$NDX is bumping up from trendline support after correcting an overbought condition. We should see new highs in its future.

[Deleted]

Meta and Amzn both had good earnings it seems, stocks are up after hours. I do not have meta, sad.

[FD1000]

Observations:
1) The SP500 has been overvalued at least since 2010 per Shiller (money.cnn.com/2012/04/10/pf/investing-Shiller.moneymag/index.htm) and others.
2) QQQ is definitely overvalued but made 18% in just 3 months regardless.
3) Valuation do not bring markets down, the following are examples of 20+% decline:...2008-9(MBS fiasco)...2018(The Fed increase rate 3-4 times)...2020(Covid)...2022(Fed rate increase)
4) The Fed had another mini blink, two days ago, The Fed chair said the rate increase for this cycle is probably over. Sure, this may change based on new data but the general perception matters a lot and why the 10 years went down. My ST T/A signaled a buy 6 days earlier (schrts.co/WUVcTxEF) on Jan 25 = the market signals front run the Fed.
Looks like reality sank in, too many jobs created and rates reversed.

[FD1000]

Another observation:
While SPY,QQQ were up today, VTV(value) + IWM(SC) + VXUS(international) lost money today = a great example why diversification doesn't work.

[roi2020]

Feb 3, 2024 1:59:15 GMT FD1000 said:

Another observation:
While SPY,QQQ were up today, VTV(value) + IWM(SC) + VXUS(international) lost money today = a great example why diversification doesn't work.

Here's my observation:
One day's performance is a terrible example "why diversification doesn't work."

[FD1000]

Feb 3, 2024 2:17:40 GMT roi2020 said:

Feb 3, 2024 1:59:15 GMT FD1000 said:

Another observation:
While SPY,QQQ were up today, VTV(value) + IWM(SC) + VXUS(international) lost money today = a great example why diversification doesn't work.

Here's my observation:
One day's performance is a terrible example "why diversification doesn't work."

Well, US LC tilting growth has been working now since 2010, and that's a pretty long time.

Attachments:

[oldskeet]

Hi guys. For the week the S&P500 Index gained 1.4% and the barometer fell from a reading of 77 to 66. This is due in good part that the cap weighted Index is out performing the equally weighted Index by a large margin. Year to date the cap weighted Index is up about 4% while the equally weighted Index is up only 0.2%. Because of the narrow breadth a few stocks (mostly the mag seven) have by and large provided the gusto seen in the cap weighted Index. This, for me, creates good concern as the cap weighted Index has a forward p/e ratio of 20.4 while the equally weighted Index is 16.6. Thus the cap weighted Index is more expensive. In comparison, the mid caps as represented by MDY has a p/e ratio of 15 and small caps as represented by IJR is at 13.8. I'd be surprised if the cap weighted Index can maintain this outsized momentum over the equally weighted Index unless breadth expands. With this I have started to buy the laggards as I believe better value and opportunity is found in them.

[yogibearbull]

Watch stock and oil futures on Sunday evening and the market open on Monday. The huge US strikes in Syria and Iraq were on late-Friday when the markets were closed.

[uncleharley]

I cannot add much to Skeets report except to note that the weekly chart for the S&P mid-caps looks more constructive than the small-caps. Tech and financials seem to be leading sectors. The Buck seems to be stable in the forex market.

[retiredat48]

oldskeet,...thanks for your continuing posts.

R48

[oldskeet]

Hi guys. Here is the update for the Leadership Investment Strategy for the weekending February 2nd. The Win with a track score of 24.90 is QQQ, Place goes to SPY with a score of 19.82, and Show, EWJ, crossed with a score of 15.30. All had positive momentum for the week along with IEV and SHV. Seems MDY and IJR have lost momentum and are running in mid pack positions; but, ahead of CEF, EEM and EPP which round out the field. Thanks for stopping by. Old_Skeet

[anitya]

Feb 2, 2024 0:04:05 GMT waffle2 said:

Meta and Amzn both had good earnings it seems, stocks are up after hours. I do not have meta, sad.

I sold 60% of Meta on 12/31/2023 because I wanted to sell something overvalued.  I bought PFE with that money.  

The other bad sale in 2023 was selling 45% of UBER - a trailing stop trade.  

Too much free time leads to bad trades.  

[yogibearbull]

"Overbought" is a standard term when sentiment indicator(s) are above certain values, e.g. RSI(14) > 70, or %Above 50-dMA > 70, etc. That is why it's mentioned often in this "sentiment" thread. It's more an indication of state of sentiment (and the market) - not much different from saying it's "hot" when temperature is > 90 degF.

Of course, SPY, QQQ, etc are powered by Magnificent 7 and META happened last week. As for YTD,

SPY +4.01%, RSP +0.22%, QQQ +4.76%, FCNTX +10.38% (so, this humongous fund can move).

oldskeet , has done a good job keeping this "sentiment" thread alive when other similar threads have withered away due to nitpicking.

Edit/Add. It seems that the post I responded to, without quoting or tagging the post author, has disappeared. But this post also has general info of interest, so it stays.

[oldskeet]

Hi YBB. Some may be puzzled in reading your above comment as a standalone. However, the comment made by another has been removed that I believe you were responding to. For me, I had chosen not to respond to it. Sometimes, it is just best to move on and let their comments go unanswered. Thanks for making comment for it reflects much of what I would have written myself. Good job. Old_Skeet

[anitya]

uncleharley,

Need your help with two divergences.

1. DIA's 14 day RSI has been trending down since mid December while DIA keeps moving up. Is it just a super hot RSI coming down and hovering close to 70 and thus no loss in bullishness?

2. US dollar and SPY usually move in the opposite direction. In 2024 they are highly correlated. Is this just a reflection of a good economy that is driving both of them up?

Why these divergences may not resolve to make the stock market go lower?

[anitya]

One of the first things I learned about markets is that bullish or overly bullish sentiment is not a contra indicator but overly bearish sentiment could be a contra indicator.  I still have to remind myself about this often because our reptilian brain is always looking for dangers rather than enjoy "what is".  

If it is alright with the thread participants, it would be great if OS reminds us at the end of his weekly posts the value of bullish vs bearish sentiments.  Similar to YBB's reminder but only as a one liner.

[yogibearbull]

Futures on Sunday evening, 2/4/24

Stock, oil, gold futures opened normally.

Middle Eastern markets open on Sunday were normal.

So, no market reaction to US strikes in the Middle East on late-Friday.

[archer]

anitya , For what it's worth, I think the divergences are a 2ndary indicator, and often resolve by the market going sideways for a bit, or finding a near support level. During divergences, my favorite talking head with the baseball cap likes to look for reversing candles, sector rotation to defensives, or or any other supporting bearish signs to combine with the divergence.

I got out of the market a few times in 2021 due to some bearish indicators, much to my peril, so I am more cautious about doing so now.

[yogibearbull]

It seems that for DJIA, the RSI(14) peaked in Dec, troughed on Jan 17, and since then, both RSI(14) and DJIA are up.

[uncleharley]

Feb 4, 2024 20:00:59 GMT anitya said:

uncleharley ,

Need your help with two divergences.

1. DIA's 14 day RSI has been trending down since mid December while DIA keeps moving up. Is it just a super hot RSI coming down and hovering close to 70 and thus no loss in bullishness?

2. US dollar and SPY usually move in the opposite direction. In 2024 they are highly correlated. Is this just a reflection of a good economy that is driving both of them up?

Why these divergences may not resolve to make the stock market go lower?

The daily RSI has leveled out in the past 2 wks or so indicating that the overbought condition for the DJI has been mildly corrected.  The fact that the momentum indicator [MACD] has turned up on good trading volume confirms that the condition has passed.   The weekly chart for the DJI shows that Captain price is continuing in its upward trend on good volume after making a bullish break from the cup w handle pattern last year. 
 Correlation are best measured over a longish period of time.  The daily or even weekly wiggles can be interesting to watch, but by themselves do not mean much.  


stockcharts.com/h-sc/ui?s=$INDU&p=W&b=3&g=0&id=p67048560508&a=697222199&listNum=86

[oldskeet]

Hi guys. In review of the barometer feeds this morning I am finding enough softness that gives me pause. With this, I have begun an equity trimming process. More details to follow. Old_Skeet

[anitya]

uncleharley, yogibearbull,archer,

The divergences in large cap I mentioned above when read with what is going on with small caps (down, with no divergence) does not give me much confidence in broad US equities in the short run.

[uncleharley]

Rough day for my portfolio, but my distys keep rolling in. Most major stock indexes closed down today but up from their lows. Treasury rates are trending up, but may be hitting some resistance soon. The USD is trending up along with treasuries creating a headwind for some stocks and most commodities. The movement in treasury rates is probably attributable to Powells comments about Fed rates not coming down soon. The Tech sector closed up, but not enough to pull the Nasdaq 100 up. I always thought the NDX was all tech. Anyway, it looks like stocks are going to consolidate here probably until Powell speaks again, or something happens that increases the participation of small caps. Meanwhile I am still expecting 5800 or so on the S&P by EOY.

[oldskeet]

Hi guys. Yesterday, the Barometer hit a threshold mark where I chose to lighten up in my small/mid cap sleeve in an underperforming fund that was lagging the overall performance of it's member sleeve. In addition, the Barometer has had falling readings since the first of the year moving from a reading of 83 to a reading of 62 where I chose to do a little selling to preserve principal. I am thinking we have seen the peak and are now in a decent as the breadth reading in the Index has moved from 90+ down to 66. What this means is the mag 7 and others are going to have to do heavier lifting to maintain the overall price line in the Index. Thus, I chose to trim from underperforming funds. And, so it goes. The futures were mixed when I checked them this morning. Wishing All, Good Investing. OS

Trailing Comment.  I am still long term bullish for the year with a price target of 5200 for the S&P500 Index before year end.