HOUSING STARTS (MarketWatch)
“Builders started construction on new homes in the U.S.
at a pace of 1.6 million in February, the Commerce Department said
Wednesday. This represented a 1.5% decrease from an upwardly revised
1.62 million in January, but was 39% higher than a year ago. Story at…
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 2.0 million barrels from the
previous week. At 453.7 million barrels, U.S. crude oil inventories are about
3% below the five year average for this time of year.” Press release at…
CHRIS CIOVACCO ANALYSIS (YouTube)
Here a slide from a presentation by Chris Ciovacco of
Ciovacco Capital.
Presentation at…
CORONAVIRUS (NTSMBlog)
There are currently 7769 coronavirus cases in the United
States. Using an average of the growth rate over the last 3 days, there would
be close to 9 million case in 30-days if the current growth rates
continue. We can hope that this number
won’t happen due to the quarantines and social distancing habits underway. There is also a lot of variability in the data since it updates all day long. While
the number sounds extreme, the number of cases has been doubling every 3 to 4
days. Exponential growth gets big in a hurry.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 5% to 2398.
-VIX slipped about 0.7% to 76.45.
-The yield on the 10-year
Treasury rose to 1.185.
Today was a wild day in the stock market. There was
almost an 8% swing on the S&P 500 with 5% of that coming in the last hour-and-a-half
as the Index rose into the close. There was actually some good news; the
S&P 500 closed higher than the recent low of 2386 from Monday. It was hard
to feel good about it, though, given the extreme volatility.
Sentiment is starting to look bullish. I measure
Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in
Rydex/Guggenheim mutual funds. On a standard deviation basis, Sentiment has
dropped enough to give a Buy-signal for a short correction, time-wise. This
method of analysis gave us a Buy-signal the day after the market bottomed
during the 20% correction in December 2018. The raw number is scary though; the
5-day average is 79%-bulls and that doesn’t seem to be low enough for a buy
signal. If this continues as a crash scenario, extended over a long time, the
sentiment should fall below 33%. For now, I am inclined to accept this as a buy
signal. This collapse has happened so
fast that Guggenheim investors have not had time to readjust their thinking.
This improves the long-term signal to Hold, but does not give us a Buy-signal
overall.
I’ll have to be careful about this. If the correction remains underway for an
extended time, I’ll have to reconsider the Sentiment indicator.
We saw another greater than 90% down-volume day, but it didn’t
meet all of the tests to be an extreme bearish signal. The close was too high.
In the past 15 years or so, corrections greater than 10%
have lasted 68 days top to bottom. We’re
at day 18 in the correction and the S&P 500 is now 25.3% below its all-time
top, on 19 Feb. It is 17% below its 200-dMA.
I have been hoping that Monday was the end of the
waterfall decline. So far, we have not seen anything that would end that hope;
Monday could have been the “momentum low.” Unfortunately, it is possible that
selling will pick up again.
At this point, we have retraced 1% toward the old highs.
A normal retracement would be in the range of 40-60%, before the markets begin
falling again.
Overall, the daily sum of 20 Indicators declined
from -8 to -11 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations dipped from -92
to -93. (These numbers sometimes change after I post the blog based on data
that comes in late.) Most of these indicators are short-term.
No bottom is indicated today, but perhaps Monday may have
been a short-term bottom.
We’ll need to see a retest or Bullish signs in Volume or
Breadth to sound the all-clear for a final bottom.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral
reading.)
Today’s Reading: +5**
Most Recent Day with a value other than Zero: +5 on 18
March. (The S&P 500 Index is too far below the 200-dMA when sentiment is
included; Non-Crash Sentiment is bullish; Breadth has made a bullish divergence
from the S&P 500; Money Trend has made a bullish divergence from the Index;
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.
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.
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%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to NEGATIVE 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 40% invested in
stocks as of 3 March. (I previously dropped stock allocations to 45% on 27
January). You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the PRICE SENTIMENT indicators are bullish;
the VOLUME and VIX indicators gave bear signals. The Long-Term Indicator improved to HOLD. The
important sell signal was 24 February and I sold before that due to other
signals.
