Markets are closed for Good Friday tomorrow. Happy Easter
and have a joyous Passover.
“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
PRODUCER PRICE INDEX (Reuters)
“U.S. producer prices fell in March, with the cost of
goods dropping by the most since 2015, and further declines are likely as the
novel coronavirus weighs on demand for energy products.” Story at…
JOBLESS CLAIMS (Reuters)
“A staggering 16.8 million Americans have filed for
unemployment benefits in the last three weeks, with weekly new claims topping 6
million for the second straight time last week as the novel coronavirus
outbreak relentlessly savages the economy.” Story at…
UNIV OF MICHIGAN SENTIMENT (MarketWatch)
“The preliminary reading of the consumer sentiment survey
sank to 71 in early April from 89.1, marking the biggest-ever one-month decline
and putting the index at lowest level since 2011, the
University of Michigan said Thursday.” Story at…
BULL MARKET OR BEAR MARKET RALLY? (YouTube)
Louise Lamada, Managing Director of Louise Yamada
Technical Advisors, says, “At the moment I would say it’s a Bear Market Rally.”
Watch YouTube video at…
HERE’S WHAT GOLMAN SACHS IS TELLING RICH CLIENTS
(marketwatch)
“We see light at the end of the tunnel because we believe
that sooner or later the medical community will make breakthroughs, and because
the fiscal and monetary response around the world, especially in the U.S.,
where we’re overweight stocks, has been pretty aggressive and forceful…’Right
now is a good time to get back into markets and take advantage of the decline in
equity markets to position for the rebound,’ Ardagna added [Silvia Ardagna,
managing director in the investment strategy group within Goldman Sachs]. Her
comments follow the advice of Goldman’s investment strategy group from
mid-March, which advised clients to gradually add risk assets after the big
pullbacks.
NOMURA UNENTHUSIASTIC INORGANIC BEAR MARKET RALLY
(ZeroHedge)
“Nomura's quant Masanari Takada…said [Tuesday] that the
current rally, which pushed the S&P back into a bull market from its March
24 lows was nothing more than a giant "bear squeeze" rally, driven by
panicked exits from shorts that investors accumulated during the downturn, he
doubled down today [Wednesday] when in a note published overnight, he said that
"the present
rally should best be viewed as an unenthusiastic, inorganic bear market
rally" and that "the stock market rebound across major world
markets is being led by exits from bearish trades, including a squeeze on short
positions held by systematic traders”… Nomura expects the
systematic buying to fizzle out by April 22 at the latest.” Commentary at…
CORONAVIRUS
The COVID19 Johns Hopkins website reported fewer new
cases today compared to yesterday, so perhaps yesterday was an anomaly. There
were 29,000 new cases today and 36,000 new cases yesterday. The growth rate is
the important number and the 5-day average is falling. We have not peaked in
total cases yet; total cases are still rising – they’re just rising more
slowly.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.5% to 2790.
-VIX dropped about 4% to 41.67.
-The yield on the 10-year Treasury dipped to 0.729.
Intel and Microsoft were down today. Apple was positive,
but it still underperformed the S&P 500 Index. All three significantly underperformed the
S&P 500 for the day. They are at interesting price-points. Apple’s price is
now where it was about 10 December 2019, right before the price went
semi-parabolic up to its all-time high as the S&P 500 did the same. Intel
and Microsoft, too, are both now sitting at their price levels from mid-January,
again, just before each jumped into parabolic climbs. I suspect all three will
have a hard time going higher. This quick and dirty analysis, suggests they have
reached fair value (for lack of a better term). Since the prior leaders are fading
(all three were in our top momentum plays recently), it looks like the rally is
getting over-done. Another way of thinking about this – if the markets are going
to continue higher, investors will need more information on the damage to the
economy along with estimates of recovery time.
MICROSOFT (MSFT) 6-Month Chart
Chart from Yahoo Finance at…
Time for Friday’s rundown of some important indicators…this
time on Thursday:
BULL SIGNS
-100-dMA of Breadth is moving up.
-MACD of S&P 500 price made a bullish crossover 26 Mar.
-MACD of stocks advancing on the NYSE (breadth) made a
bullish crossover 26 Mar.
-The Fosback High-Low Logic Index is Bullish. It called
the top of the 20% correction in Sep-Dec 2018 to the day.
-New-high/new-low data is bullish.
-Non-crash Sentiment is bullish.
-Breadth on the NYSE vs the S&P 500 index bullish.
(There is a bullish divergence.)
-The size of up-moves has been more that down-moves over
the last month.
-We saw a 90% up-volume reversal followed by consecutive
80%+ up-volume days 24-26 March strongly suggesting an up-trend. Unfortunately,
we had a bearish 90% down-volume day reversal on 1 April. Even though it didn’t
meet all the Lowry Research tests for a 90% down-volume day, this still looked
bearish to me coming only 7 days after the bottom. Since then, we’ve seen 2
more 90% up-volume days that didn’t quite meet the criteria for a bullish sign.
Still, this IS bullish.
NEUTRAL
-The S&P 500 is neutral relative to its 200-dMA.
-Cyclical Industrials are neutral relative to the S&P
500.
-Bollinger Bands and RSI are in neutral territory.
-Statistically, the S&P 500 has been bearish due to
several panic-signals, but it is now in the Neutral category.
-Over the last 20-days, the number of up-days is neutral.
-Overbought/Oversold Index, a measure of advance-decline
data, is neutral. (This indicator isn’t followed much anymore.)
-The 5-10-20 Timer System is NEUTRAL, because the 5-dEMA and
the 10-dEMA are mixed relative to the 20-dEMA.
BEAR SIGNS
-Money Trend has turned down.
-The last hour, Smart Money (late-day action) is overbought.
-VIX jumped sharply higher when the correction started
and is still giving a bearish signal.
-Utilities ETF (XLU) is out-performing the S&P 500
index over the last 2 months and this is a bearish sign.
On Friday, 21 February, 2 days after the top of this
pullback. There were 10 bear-signs and 1 bull-sign. Now there are 9 bull-signs
and 4 bear-signs.
Today’s S&P 500 level of 2757 represents a retracement
of 48% from the prior low back toward the all-time high. 57% retracement (2810)
is the average for this type of rally; 52% is the median. (I’ve been reporting
50% average…close enough.) The rally has lasted 13 days; the average length of
a counter-trend rally after a 15% waterfall decline is 21 days. The median is 11 days.
The Index is currently down 17.6% from its all-time high.
Today is day 36 of the correction. Corrections greater than 10% last (on
average) 68 days. Crashes are significantly longer; I am not sure if this is a
crash yet. It certainly has the potential
to be one.
Overall, the daily sum of 20 Indicators slipped
from +8 to +7 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +56 to +54.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
Based on history, a retest of the low is still the most
likely outcome, and as noted above, today, we saw some evidence that the rally
may be nearing an end. Still, if the market continues much higher, I’ll
need to re-evaluate and increase stock holdings.
RECENT STOCK PURCHASES
INTEL. SOLD
I sold Intel today when it stalled as noted above. The Intel gain offset all of the losses from
the sale of SSO, Starbucks, and Apple.
Of recent purchases 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.
-XLK. Technology ETF spreads some risk and gives exposure
to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +3**
Most Recent Day with a value other than Zero: +3 on 9
April. (Non-Crash Sentiment is bullish; Breadth has made a bullish
divergence from the S&P 500; Money Trend is bullish, but trending down; the
Fosback New-hi/new-low Logic Indicator is bullish; Smart Money is bearishly 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:
IBB has the highest negative momentum; IBB (iShares
Biotech ETF) is the best of the bad. IBB
is down “only” 5% in the last 40-days; XLE is down 50%.
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. 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%%; in this case, -100%
because the market has been so bad. The rest are then ranked based on their
momentum relative to the leading stock. The highest ranked are those closest to
zero.
United Technologies is now Raytheon Technologies, ticker
symbol RTX. I’ll need to do some work to
bring this up to date. For now, ignore
RTX in the momentum analysis.
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals slipped
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
Thursday, the VOLUME, PRICE and NON-CRASH SENTIMENT
indicators are bullish; the VIX indicator is still giving a bear signal.
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.
