CHICAGO PMI (MarketWatch)
“A measure of business conditions in the Chicago region
slipped to 47.8 in March from 49.0 in the prior month, according to a report from MNI. This is the ninth
consecutive sub-50 reading. Any reading below 50 indicates worsening
conditions.” Story at…
CONSUMER CONFIDENCE (MarketWatch)
“Consumers started to rapidly lose confidence in the
economy in March as a deadly coronavirus spread…The closely followed index of
consumer confidence fell to 120 in March from a revised 132.6 in February…”
Story at…
GOLDMAN SEES A BEAR BOUNCE – NOT A BOTTOM (ZeroHedge)
“Taking the experience of the bear markets since the
1980s, including the collapse of the technology bubble in 2000-2002 and the GFC
in 2008, we see a pattern of rebounds before the market reaches a trough…For example, during the GFC
there were 6 rallies similar to the one we had last week. Below
we show the 18 global bear market rallies since the dot-com bubble….On average,
they last 39 days and the MSCI AC World return is almost 15%.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 1.6% to 2586.
-VIX dropped about 6% to 53.54.
-The yield on the 10-year
Treasury dipped to 0.677.
The Index is currently down 23.7% from its all-time high
and the rally has retraced 30% of the drop.
The first Fibonacci retracement level would be 38%, with additional
levels at 50% and 62% (for those who believe in Fibonacci numbers – I am not
convinced).
The today’s intra-day high represented a 35% retracement
from the low back toward the prior high. The first Fibonacci level is 38% so we
might have seen some resistance at the 38% retracement level. For the most
part, we didn’t learn anything new.
My guess is that the end of this rally will be punctuated
by a big up day. That hasn’t happened yet,
so I think the rally will continue.
Overall, the daily sum of 20 Indicators slipped
from +9 to +4 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from -16 to -4.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
I suspect we have seen the low or close to it. That
doesn’t mean we won’t have a retest of that low or that the market can’t take
prices lower. I will wait for a retest before adding further to stock holdings
and I still might take profits on the ongoing rally if I get worried.
RECENT STOCK PURCHASES - I plan to set Stop orders to try
to protect recent purchases from extreme losses if this market turns down.
-SSO. (2x S&P 500 ETF) I will sell my SSO position
when I think the rally is over. This is a true trading position. Other recent
purchases may or may not be long-term holds – just depends on market action and
indicators.
-Biotech ETF (IBB). #1 in momentum. We’re in a health
crisis so perhaps this will be a good longer-term hold too.
-Apple. China is returning. #1 in momentum before the
crisis.
-Intel. Low PE; good story (laptops are in demand for
working at home); good momentum before the crisis.
-XLK. Technology ETF spreads some risk and gives exposure
to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.
-Starbucks. China is returning and they should do better
than most in earnings here in the US.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +6**
Most Recent Day with a value other than Zero: +5 on 30
March. (The S&P 500 is too far below its 200-dMA when sentiment is
considered; Non-Crash Sentiment is bullish; Breadth has made a bullish
divergence from the S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low
Logic Indicator is bullish; and Smart Money {late-day-action} is oversold.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
**The Top/Bottom indicator continues to give
extreme oversold readings, but as I have been saying, we won’t know when we
have a bottom until we have a successful retest, or a reversal buy-signal from
Breadth or Volume…Well, we had the bullish Breadth AND Volume reversal signals,
but nothing is ever certain, is it?
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%; in this case, -100%
because the market has been so bad. The rest are then ranked based on their momentum
relative to the leading ETF. The highest
ranked are those closest to zero. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed
the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked in the top 3
Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.)
XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%, rather minus 100%
since the market has been bad. The rest are then ranked based on their momentum
relative to the leading stock. The highest ranked are those closest to zero.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals dropped
to NEUTRAL on the market.
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. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
Using the Short-term indicator in 2018 in SPY would have
made a 5% gain instead of a 6% loss for buy-and-hold. The methodology was Buy
on a POSITIVE indication and Sell on a NEGATIVE indication and stay out until
the next POSITIVE indication. The back-test included 13-buys and 13-sells, or a
trade every 2-weeks on average.
My current stock allocation is about 50% invested in
stocks. (I previously dropped stock allocations to 45% on 27 January and lower
a few days after the decline started.) You may wish to have a higher or lower %
invested in stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the New-High/New-Low, VOLUME and NON-CRASH
SENTIMENT indicators are bullish; the VIX indicator is still giving a bear
signal. The and PRICE indicator is Neutral.
The Long-Term Indicator DIPPED TO HOLD. I am already at 50% invested in stocks. If we
do retrace down, I’ll try to find a good buy-point. At that time, I’ll increase stock holdings
significantly.
