“The curve is flattening, we can lift restrictions; The
parachute has slowed our rate of descent, we can take it off now.”
EXISTING HOME SALES (Marketwatch)
“Sales of previously-owned U.S. homes sank 8.5% in March
just as the coronavirus pandemic began to shut down large parts of the economy
and throw the real estate market into disarray.” Story at…
ECRI WEEKLY LEADING INDEX
(Advisor Perspectives)
“This morning's release [Monday] of the publicly
available data from ECRI puts the WLI at 111.3, up 4.5
from the previous week. The WLIg is at -42.55, down 6.05 from last week and its
lowest level in its history.” – Jill Mislinski.
Charts and commentary at…
TO “V” OR NOT TO “V” – EXCERPT (TCW GROUP)
“…to assume a return to “normalcy” unconsciously assumes
that the January 2020 economy was “normal.” It was not. A
good thought experiment might be this: what percent of the labor force is
likely to be impacted by the combination of factors that will necessarily mean
a different “normal” on the other side of this? If you are still an optimist,
you might posit that perhaps only 5% of the labor force might be so impacted.
Were that so, then we might suppose that unemployment might semi-permanently
seek out a level of January’s 3.5% level plus the additional 5% virus impacted
such that we arrive at an 8.5% unemployment rate on the “other side.” High, but
the U.S. economy could likely work that number down to a few points over a few
years. What it won’t do is work 8.5% unemployment down to January’s
“normalized” 3.5% figure by the end of the summer! We’ll eat our hats if it does!”
– Tad Rivelle, CIO, TCW Group. Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5 PM Tuesday. The U.S. numbers continue to bounce around. Today, there
were 2,400 more cases than yesterday so the numbers continue to go in the wrong
direction. Today’s growth rate is 1.02 so the new cases are growing at a rate
of 2% per day. Based on the 5-day calculation. The guidance is generally not to
reopen until one sees 2-weeks of falling numbers of new-cases. Currently, new
cases are RISING.
As the chart shows, the curve did flatten in mid-April,
but then accelerated last week. Now, new-cases have continued to rise at a somewhat slowed pace. These numbers
are based on U.S. totals; local data will be different.
ANTI-QUARANTINE RALLY (USAToday)
“We have never cowered to a virus in this country before
– ever,” Kirsten Lombard, 53, of McFarland, said outside the Capitol building.
“I don’t know why we are now.” Story at…
My cmt: Yes we did: 1918. “The Spanish influenza arrived
in the United States at a time when new forms of mass transportation, mass
media, mass consumption, and mass warfare had vastly expanded the public places
in which communicable diseases could spread. Faced with a deadly “crowd”
disease, public health authorities tried to implement social-distancing
measures at an unprecedented level of intensity. Recent historical work
suggests that the early and sustained imposition of gathering bans, school
closures, and other social-distancing measures significantly reduced mortality rates
during the 1918–1919 epidemics.” Public Health Report 2010 from…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 3.5% to 2737.
-VIX jumped about 4% to 45.41.
-The yield on the 10-year Treasury fell to 0.570.
Today was the first time there were back-to-back down
days since 1 April. We had more bear signs to go along with the drop. The
McClellan Oscillator has dropped by 206 in two days. A one day drop of 100 or more shows a strong
bearish move in breadth (advance-decline). 2 days in a row is big. VIX moved up
again and the 7-day ROC of VIX confirmed the bearish signal from yesterday. The
direction of Money Trend is down and that’s bearish.
Friday’s S&P 500 level of 2875 represented a
retracement of 55% 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 lasted 18 days (as of 17 Apr) if it is over; the average length of a
counter-trend rally after a 15% waterfall decline is 21 days. The median is 11 days.
Time-wise, price-wise and given the bearish signals we’ve
mentioned recently, the rally looks like it is over for the time being.
The Index is currently down 19.2% from its all-time high.
Today is day 43 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. It
certainly has the potential to be one. If the bottom is in, this correction
is over and it lasted 23-days. I don’t
think so, but I have been wrong before.
Overall, the daily sum of 20 Indicators dropped
from +9 to -1 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +68 to +60.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term. The downward trend is bearish.
Based on history, a retest of the low is still the most
likely outcome. Still, if the market were to make new highs, I would need
to re-evaluate and increase stock holdings.
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: +1 on 20
April. (Non-Crash Sentiment is bullish; Breadth is diverging from the
S&P 500 in a bullish direction; Money Trend Spread vs the S&P 500 is
bullish; and Smart Money is minus 1 (bearish) since it is now “overbought”.)
(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:
IBB has the highest momentum; IBB (iSharesBiotech
ETF) is the best of the bad.
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.
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 35% 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 VOLUME, PRICE and NON-CRASH SENTIMENT
indicators are bullish; the VIX indicator is still giving a bear signal.
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 remained HOLD. If we do
retrace down, I’ll try to find a good buy-point. At that time, I’ll increase stock holdings
significantly.
