MICHIGAN SENTIMENT (Reuters)
“U.S. consumer sentiment fell less than expected in early
March as households responded to the coronavirus pandemic and a sharp stock
market sell-off, but also hoped that any disruptions to economic activity would
be temporary…The University of Michigan said its consumer sentiment index fell
5.0% to a reading of 95.9…” Story at…
COVID19 STRATEGY (NavigatetheStockMarketblog)
“The Politicians are wrong on both sides. The steps taken
so far, will not stop the virus, but they will slow its progression. If we can slow it enough, the Hospital system
will not be overwhelmed. Numbers are small now, but if the current rate of exponential
growth were to continue unabated, half the population of the U.S. would be
infected in 30-days. That would be a crisis for hospitals, even if this disease
was no worse than the common flu. (Actually, the numbers say that everyone in
the country would have the virus in less than 30-days, but that won’t happen
because the exponential growth will slow on its own when huge numbers already
have the disease.)
I corrected the “MY COVID19 STORY” from yesterday. The
individuals who showed up at my daughter’s Hospital were not admitted, so they
were not “discharged”. They were “triaged”
and sent home. All had the coronavirus, diagnosed by elimination and their
travel history; but they were not counted in the stats since the Hospital did
not have testing kits to confirm the diagnosis. Read yesterday’s blog for the
full story.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 jumped
about 9.3% to 2711.
-VIX fell about 23% to 57.83.
-The yield on the 10-year
Treasury rose to 0.981.
Repeating: I am reminded of a comment by Jeffrey Saut,
Raymond James for Chief Strategist. He talked about a stock-market, “selling
stampede” that tends to last 17 – 25 sessions, with only 1.5-to three-day
pauses/throwback rallies, before they exhaust themselves on the downside.
Today is day 17 of the current selling-stampede so the
timing is right for an end soon. He also noted, “Never on a Friday”, an old
adage on Wall Street. The reference was that once the markets get into one of
these big downturns, they rarely bottom on a Friday. Instead, they typically
give participants over the weekend to brood about their losses and then they
show up the next Monday in “sell mode” leading to Turning Tuesday.
That may still be the case now. The huge bounce, 7% up in
the last half hour, may have just been a short-squeeze with an additional bump
from algorithmic trading – we’ll see. I’m not calling a bottom yet. When I do,
it will be after-the-fact. A retest is likely to be a month or more away.
I’ll write some more on 90% up-volume days, later. Depending on where the final volume falls, today
might have been one of those bullish, 90% up-volume reversals. The NYSE updates
volume data until 8PM.
It’s Friday, so it’s time for a run-down of Bull/Bear
signs:
BEAR SIGNS
-Cyclical Industrials continue to underperform the
S&P 500 suggesting investors are worried. There are hints of a turn-around
in this indicator, but not yet.
-The 5-10-20 Timer is SELL, because the 5-dEMA and the
10-dEMA are below the 20-dEMA.
-Money Trend has been headed down, after a one-day when
it turned up.
-VIX jumped sharply higher when the correction started
and is still giving a bearish signal.
-MACD of stocks advancing on the NYSE (breadth) made a
bearish crossover 21 Feb.
-MACD of S&P 500 price made a bearish crossover 21
Feb.
-New-high/new-low data is falling, but it is hinting at a
turn-around to the bull side.
-We’ve seen multiple 90% down-volume days during this
selloff. According to Lowry Research:
“…our 69-year record shows that declines containing two or more 90% Downside
Days usually persist, on a trend basis, until investors eventually come rushing
back in to snap up what they perceive to be the bargains of the decade…” The
rush back is signaled by a 90% up-volume day.
NEUTRAL
-Statistically, the S&P 500 has been bearish due to
several panic-signals. This indicator expires Tuesday, so I am putting this in
the Neutral category.
-Sentiment (measured as %-Bulls [Bulls/{bulls+bears}]
based on the amounts invested in Rydex/Guggenheim mutual funds) is not giving a
buy signal, but it has finally started to get more bearish. It is now closer to
a bull signal. If it gets bearish enough, it will be a bull signal.
-The Fosback High-Low Logic Index is neutral, but it is
closer to a bull signal than a bear.
BULL SIGNS
-The S&P 500 is too far below its 200-dMA giving an
oversold a bull signal now when sentiment is considered.
-Breadth on the NYSE vs the S&P 500 index remains in
neutral territory.
-Bollinger Bands and RSI are in neutral territory today,
but I am including them in the Bull column because they were both bullish yesterday.
-Overbought/Oversold Index, a measure of advance-decline
data, is oversold. (This indicator isn’t followed much anymore.)
-The Smart Money (late-day-action) is oversold.
-At the same time, the smart money is buying, but the
amounts have been limited. This is typical though; the Pros start buying near
the bottom, not at the bottom.
-Over the last 20 days, there have only been 6
up-days. That’s a bullish, oversold
sign.
-As of Friday, the size of down-moves has been larger
than the size of up-moves over the last month.
-XLU has been outperforming the S&P 500 index and it
still is; however, this week XLU bounced up and made up a huge amount of
ground. My take is that this indicator is now bullish based on its improvement.
Overall, the daily sum of 20 Indicators improved
from -11 to -6 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations improved from
-101 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. We
continue to see some improvement; but not enough to be confident of a bottom!
The “average” correction has been 12% since 2009. In the
past 15 years or so, corrections greater than 10% have lasted 68 days top to
bottom.
We’re at day 17 and the S&P 500 is now 19.9% below
its all-time top, on 19 Feb. It is 11.1% below its 200-dMA.
No bottom is indicated, but perhaps it won’t be much
longer until we see a preliminary bottom.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +4**
Most Recent Day with a value other than Zero: +4 on 13 March.
(The S&P 500 Index is too far below the 200-dMA when sentiment is included;
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)
*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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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
Friday, the PRICE indicator is bullish; the VOLUME and
VIX indicators gave bear signals. The SENTIMENT Indicator was neutral. The Long-Term Indicator remained SELL.
The important sell signal was 24 February and I sold before that due to other
signals.
