“Since the stock market peaked on February 19, there has
not been any back to back rally days. None. Seeing two consecutive up days will
be one sign to look for that perhaps the tide is turning.” – Paul Schatz,
President, Heritage Capital.
JOBLESS CLAIMS (CNBC)
“The sudden 33% spike in weekly jobless claims to 281,000
is just the start of a major increase in claims by unemployed workers, as
layoffs start to snowball across the country. Economists now expect the
unemployment rate to jump sharply and possibly double the 3.5% level of
February.” Story at…
PHILADLEPHIA FED INDEX (MarketWatch)
“The
Philadelphia Fed manufacturing index in March plunged to -12.7
after registering 36.7 in the previous month. That’s the lowest reading since
June 2012.” Story at…
https://www.marketwatch.com/story/philly-fed-manufacturing-index-sees-big-plunge-in-march-2020-03-19
My cmt: No surprise here. Economic reports are liable to
be negative and getting worse.
LEADING ECONOMIC INDICATORS (MarketWatch)
“The leading economic index rose a slight 0.1% in
February, but that was before the coronavirus began to bring U.S. growth to a
standstill.
CORONAVIRUS (NTSMBlog)
There are currently 11,274 coronavirus cases in the
United States, an increase of 3,505 from yesterday. With more testing this bump
was expected. It’s good news, if it gets sick people into treatment. There is
no point in projecting the number of cases in 30-days – it’s basically the US
population. We need to see the growth rate stabilize.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.5% to 2409.
-VIX slipped about 6% to 72.
-The yield on the 10-year
Treasury slipped to 1.158.
It still looks like the waterfall decline has ended. The
S&P 500 has not closed below its 2386 low on Monday. There was a weak re-test
on Wednesday, but it was not a successful test and it is too soon for a real test
anyway. We saw some positive signs today as the market closed higher with
improving market internals. This all suggests a bounce may be starting. For declines
greater than 15%, rallies off the low have lasted, on average, 22 sessions with
a median value of 11. Both the average and median retracement has been 57% and
52% respectively. At this point, we have
retraced 2% toward the old highs.
In the past 15 years or so, corrections greater than 10%
have lasted 68 days top to bottom. We’re
at day 21 in the correction and the S&P 500 is now 28.8% below its all-time
top, on 19 Feb.
Overall, the daily sum of 20 Indicators declined
from -11 to -7 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations dipped from -93
to -89. (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 19
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
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 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
Thursday, the PRICE SENTIMENT indicators are bullish; the
VOLUME and VIX indicators gave bear signals. The Long-Term Indicator remained to HOLD. The
important sell signal was 24 February and I sold before that due to other
signals.
