CONSUMER CONFIDENCE (Conference Board)
“The Conference Board Consumer Confidence
Index® deteriorated further in April, following a sharp decline in March.
The Index now stands at 86.9 (1985=100), down from 118.8 in March…“Consumer
confidence weakened significantly in April, driven by a severe deterioration in
current conditions,” said Lynn Franco, Senior Director of Economic Indicators
at The Conference Board. “The 90-point drop in the Present Situation Index, the
largest on record, reflects the sharp contraction in economic activity and
surge in unemployment claims brought about by the COVID-19 crisis. Consumers’
short-term expectations for the economy and labor market improved, likely
prompted by the possibility that stay-at-home restrictions will loosen soon,
along with a re-opening of the economy. However, consumers were less optimistic
about their financial prospects and this could have repercussions for spending
as the recovery takes hold. The uncertainty of the economic effects of COVID-19
will likely cause expectations to fluctuate in the months ahead.” Press release
at…
DANGEROUS RALLY (Seeking Alpha)
“Leadership in this rally stinks. Valuations are approaching
levels in some cases where they triggered the decline. And while the market
does predict the economy six months to a year or more out, in this case it
seems to me the market is predicting a far better outcome in that time frame
than I think is realistic. So economic exuberance, narrow leadership, narrower
breadth (no followers of the leaders) and valuations approaching old highs.
What could possibly go wrong?” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7 PM Tuesday. Nationwide, there were about 5300 more new-cases than
yesterday. The 4-day growth-rate was 1.03, i.e., average new cases are rising
at a rate of 3% per day. As the curve below shows, there isn’t much flattening of
total cases – the curve is basically straight for all of April.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1.5% to 2863.
-VIX rose about 0.8% to 33.57.
-The yield on the 10-year Treasury slipped to 0.615.
I did bump my % of stocks up to 40% today, even as my long-term
indicator dropped from BUY to HOLD.
Today my VIX indicator switched to SELL and the Volume indicator
switched to neutral. That was a surprise
and it pushed the long-term indicator to HOLD. My indicators are designed to
identify conditions at tops and bottoms so today’s move doesn’t mean a lot.
One may ask, “Why didn’t the NTMS indicator identify the
bottom of 2237 on 23 March?” Fair question.
It seems that VIX reached an extreme high value (>50) and it was slow to
fall fast enough to give us a buy signal until a month after the initial bottom.
This may or may not be a good thing. If there is a retest of the low, the VIX
Indicator may be right. For example, let’s consider the 2008-2009 Financial
crash.
There was a preliminary bottom on 27 Oct. My VIX indicator
did not switch to BUY until 8-weeks after that bottom. However, it called the
final bear-market bottom on 11 March 2009, 2 days after the final bottom.
Bottom line, my VIX indicator is either really good or not
so good depending on how long the correction lasts, therefore, I’ve been trying
to improve it.
I spent about 30-hours recently going over the VIX
indicator looking for improvements. I
finally gave up, but I realized after going thru the process the simplest
solution would be to zero-out the VIX indicator when VIX reaches extreme
values. Had this rule been in effect for
this correction the NTSM buy would have been 3-days after the bottom. This would
give us the opportunity to play the first bounce with more confidence.
On the whole, during corrections, my system lives for
lower-lows so we can decide if it is time to buy as lows are re-tested.
The S&P 500 remained above its 50-dMA, and closed 2.7%
above it for the second day in a row so the 50-d resistance level has been
successfully breached.
Monday’s S&P 500 level of 2878 represented a
retracement of 56% from the prior low back toward the all-time high. 57%
retracement (2890) is the average for this type of rally; 52% is the median.
The rally has lasted 24 days; the average length of a counter-trend rally after
a 15% waterfall decline is 21 days. The
median is 11 days. I thought the rally was over, but today proved otherwise.
The Index is currently down 15.5% from its all-time high.
Today is day 48 of the correction. Corrections greater than 10% last (on
average) 68 days, top to bottom. Crashes are significantly longer; I am not
sure if this is a crash yet. I’ll be surprised if this is over in a month.
Overall, the daily sum of 20 Indicators slipped
from +7 to +6 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations slipped from +44 to +43.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
I bumped stock holdings up to 40% of my total portfolio today,
only to watch the Index close below yesterday’s level in an afternoon selloff. Internals
were good Tuesday so it may be OK.
As I noted in my earlier post today, 3200 may be the best
we can hope for as a high. I think the problems the economy faces are worse
than investors realize and the Index will reverse and trend lower. Whether we’ll
see a retest of the low remains to be seen.
RECENT STOCK PURCHASES
Of purchases near the recent low, I still own:
-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis
so perhaps this will be a good longer-term hold too. Gilead is the largest
holding in the IBB-ETF.
-XLK. Technology ETF spreads some risk and gives exposure
to Microsoft, Cisco, etc.; was #1 in momentum in the ETFs I track before the
crisis.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +2**
Most Recent Day with a value other than Zero: +2 on 28
April. (Non-Crash Sentiment is bullish; Breadth is diverging from the
S&P 500 in a bullish direction; Late-day action is diverging in a bullish
manner form the S&P 500; and Smart Money is overbought so it is -1.)
(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
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:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. 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%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
improved to BULLILSH 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. You may wish to have a higher or lower % invested in stocks depending on
your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the SENTIMENT & PRICE indicators are bullish;
VOLUME is neutral; the VIX indicator bearish.
The 5-10-20 Timer System remained bullish, because the
5-dEMA and the 10-dEMA climbed above the 20-dEMA. This is a good indicator on
its own.
The
long-term indicator declined to HOLD.
