FACTSET EARNINGS UPDATE-EXCERPT (FactSet)
“To
date, 9% of the companies in the S&P 500 have reported actual results for
Q1 2020…The blended (combines actual results for companies that have reported
and estimated results for companies that have yet to report) earnings decline
for the first quarter is -14.5%...If -14.5% is the actual decline for the
quarter, it will mark the largest year-over-year decline in earnings for the
index since Q3 2009 (-15.7%). It will also mark the fourth time in the past
five quarters in which the index has reported a year-over-year decline in
earnings.” Analysis and commentary at…
NOW IT’S TIME TO SELL (Seeking Alpha)
“The S&P 500 has rallied nearly 30% in just three
weeks since the March lows despite the ongoing global pandemic. The environment
and economic outlook remain deeply bearish for stocks which are now once again
expensive and face significant downside. The market is too complacent over the
risks that the recovery process will be weaker than expected. Now is the time
reduce equity exposure.” Commentary and analysis at…
CDC REVIEWS STUNNING TEST RESULTS (Boston25news)
“The Centers for Disease Control and Prevention is now
“actively looking into” results from universal COVID-19 testing at Pine Street
Inn homeless shelter. The broad-scale testing took place at the shelter in
Boston’s South End a week and a half ago because of a small cluster of cases there. Of the 397 people tested, 146
people tested positive. Not a single one had any symptoms.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 8 PM Monday. The U.S. numbers continue to bounce around. In the last 3-days,
the average of new cases was 36,000 new case per day. This blew the “flattening-the-curve”
treatise; the curve was steepening. Today, the new cases were only 24,000 vs.
33,000 yesterday. That’s why I use a 5-day
average of the data to find the growth rate – it can be erratic. Today’s growth rate is 1.01 so the new cases
are growing at a rate of 1% per day. I don’t know what to make of this since new
cases were growing 10% based on yesterday’s 5-day calculation. We’ll just have to wait to see.
The guidance is generally not to reopen until one sees
2-weeks of falling numbers of new-cases. We’d have to start recounting today and
see how it goes for the next 2-weeks for the U.S. as a whole.
These numbers are based on U.S. totals and local data
will be different.
REOPENING TOO SOON COULD CAUSE AN EXPLOSION OF
CORONAVIRUS (Futurism)
“Researchers at MIT trained a neural network model on
data that predicted the spread of the coronavirus from late January to early
March, including information on how countries implemented quarantine measures.
The researchers have a dire warning, as detailed in a preprint uploaded
to medRxiv earlier
this month: reopening the US too early would lead to a catastrophe. “We further
demonstrate that relaxing or reversing quarantine measures right now will lead
to an exponential explosion in the infected case count, thus nullifying the
role played by all measures implemented in the US since mid March 2020,” reads
the paper.” Story at…
My cmt: Or as my ER nurse daughter wrote, “The curve
is flattening, we can lift restrictions = The parachute has slowed our rate of
descent, we can take it off now.”
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 1.8% to 2875.
-VIX jumped about 15% to 43.83.
-The yield on the 10-year Treasury was 0.619.
All last week we were watching an ascending triangle
pattern on the S&P 500 chart. Today,
it finally made the predicted bearish turn down and broke through the bottom
trend line. To be more convincing, we need to see the Index close below the
trend line for 2-days in a row or see a close 3% below the trend. We also note that the S&P 500 got rejected
at the 50-dMA. As of today, the Index is 1% below the 50-dMA. Check out yesterday’s
blog if you want to see the bearish ascending triangle chart.
There was another important bear sign, too: The VIX 7-day
rate of change (ROC) indicator crossed from -17 to +1. It may need to move higher
to be more convincing, but when discussing how to interpret this indicator, Tom
McClellan said, “An upward crossing through zero often (but not always) marks
an important top for stock prices.” This is logical since it looks like VIX
bottomed today and has turned up. The chart and VIX ROC suggest the rally is
over, at least for a while. We’ll see.
Both the Overbought/Oversold Index and the Smart Money
Indicator are oversold and they contribute to a bearish lean.
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 has lasted 19 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 16.6% from its all-time high.
Today is day 42 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 improved
from +7 to +9 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from +59 to +68.
(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. Still, if the market continues much higher, I’ll 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: +1**
Most Recent Day with a value other than Zero: +1 on 20
April. (Non-Crash Sentiment is bullish; Money Trend 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.
For more details, see NTSM Page at…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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
Monday, 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.
