AUTO SALES (Car and Driver)
“April auto sales are painting a dire picture of the
industry and showing just how wide-ranging an impact COVID-19 has
had. Analysts have forecasted sales totals to drop to their lowest on record…
Hyundai's sales declined 38.7 percent in April … Mazda saw auto sales drop
44.5 percent in April…” Story at…
ISM MANUFACTURING (Marketwatch)
“The Institute for Supply Management said its manufacturing index fell
to 41.5% last month from 49.1% in March. This is the lowest since April 2009.”
Story at…
CONSTRUCTION SPENDING (DailyReporter)
“U.S. construction spending edged up by 0.9% in March as
building activity escaped the early effects of the coronavirus shutdowns…
analysts believe big drops in activity will start showing up in the April
report, given the results already seen in other parts of the economy.” Story
at…
VACCINE BY JANUARY (Washington Post)
“The Trump administration is racing to develop a coronavirus vaccine that could be fielded nationwide by
January, U.S. officials said Thursday, as national stay-at-home guidance
expired.” Story at…
My cmt: Ok, this is really good news. The market fell anyway; that’s a bearish sign
and another rally-is-over indicator.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:20 PM. Nationwide, there were about 27,000 new-cases today, about 4,000
more than yesterday. The 5-day growth-rate was 1.0, i.e., average new cases are
about the same per day over the last 5-days.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dipped about 2.8% to 2831.
-VIX rose about 9% to 37.19.
-The yield on the 10-year Treasury slipped to 0.616.
My NTSM system identifies good and bad market conditions.
This is valuable after a bottom as it identifies buy-points. Unfortunately, good conditions also occur at
tops and it can give a buy signal at a top. Further, at a top, it may not give
a sell signal in a timely manner if the reversal is sudden. That’s just a
reminder that the recent buy-signal in the long-term NTSM system needs to be
carefully considered.
While we did see a down-day that broke the lower trend-line
of the ascending wedge, this could be just a reset of the lower trend line and
not an end of the rally. It is still possible to construct a lower-trend line
below today’s close (parallel to the upper trend line).
Time for Friday’s rundown of some important indicators:
BULL SIGNS
-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. In
the current correction, MACD of Breadth made a bearish crossover 3 days after
the top and a bullish crossover 3 days after the bottom so it has been a
reasonably good indicator.
-The Utilities ETF (XLU) is under-performing the S&P
500 index over the last 2 months and this is a bullish sign.
-Non-crash Sentiment is bullish. (If the downturn deepens
and becomes more extended, I’ll switch to crash sentiment; that would take a
much lower value to issue a buy-signal.)
-The size of up-moves has been more that down-moves over
the last month.
-The 5-10-20 Timer System is BULLISH, because the 5-dEMA
and the 10-dEMA are above the 20-dEMA.
-VIX jumped sharply higher when the correction started
and is falling.
-Long-term new-high/new-low data is bullish.
NEUTRAL
-Breadth on the NYSE vs the S&P 500 index is neutral.
(There is not a significant divergence.)
-Overbought/Oversold Index, a measure of advance-decline
data, is neutral. (This indicator isn’t followed much anymore.)
-The S&P 500 is neutral relative to its 200-dMA.
-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.
- The S&P 500 closed below its lower trend-line on
the ascending-wedge pattern we’ve been watching; however, it is possible to
construct a lower-trend line below today’s close (parallel to the upper trend
line), so I’ll put this in the Neutral category for the time being.
-The Fosback High-Low Logic Index is neutral, but it is
very close to bullish. It called the top of the 20% correction in Sep-Dec 2018
to the day.
BEAR SIGNS
-Today was close to a High, Down-Volume day but it did not
meet all of the tests. Still this is somewhat bearish and we should see if we
have more days with high down-volume. Repetitive high, down-volume, down-days would be a strong
sign the rally is over.
-100-dMA of Breadth (advancing stocks on the NYSE) is
moving down.
-Short-term new-high/new-low data has turned bearish.
-The last hour, Smart Money (late-day action) is headed
down – the Pros are selling based on the Smart Money Indicator (a variant of
the indicator developed by Don Hayes).
-Cyclical Industrials are underperforming relative to the
S&P 500.
-The Markets were
down today even though there was good news that a vaccine might be available by
January. When markets go down on good
news, it’s bearish.
-The 50-dMA of stocks
advancing on the NYSE (Breadth) remains below 50% and that suggests we are
still in a Bear market – it is currently 46.1%. Breadth improved to 50.3% in
3-weeks after the final March 2009 bottom of the 2008-2009 bear market.
-My Money Trend indicator turned
down, but just barely.
On Friday, 21 February, 2 days after the top of this
pullback. There were 10 bear-signs and 1 bull-sign. Now there are 8 bull-signs
and 8 bear-signs. Last week there were 7 bull-signs and 5 bear-signs.
RESISTANCE POINTS:
61.8% Fibonacci Retracement: 2950
200-dMA: about 3025
The Prior all-time High: 3386
Wednesday’s closing S&P 500 level of 2940 represented
a retracement of 61% 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 28 days; the average length of a counter-trend rally after
a 15% waterfall decline is 21 days. The
median is 11 days. (Of course, it is possible that the rally ended 29
April at day 26 of the rally. That day was statistically-significant in volume
and price in my system and that occurs at tops. Statistically-significant days
also occur on days that aren’t tops, so this isn't a guarantee.)
The Index is currently down 16.4% from its all-time high.
Today is day 51 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 3-weeks.
Overall, the daily sum of 20 Indicators dipped
from +10 to +5 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations improved 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.
I don’t have a strong opinion of where the market is going
from here, but I am leaning down, at this point. We’ll just have to see where
the indicators/markets take us.
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 1 May.
(Non-Crash Sentiment is bullish; Breadth is diverging from the S&P 500 in a
bullish direction; Money Trend vs the S&P 500 is bullish; 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…
FRIDAY 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 45% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the SENTIMENT & PRICE indicators are bullish;
VIX was bearish; VOLUME was neutral.
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 improved to BUY, but I will wait
for a better entry point. The VIX indicator has been flopping back and forth so
confidence in the buy signal is weak.
