EARNINGS UPDATE – EXCERPT (FactSet)
“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 -13.7%, which is smaller than the
earnings decline of -16.1% last week…If -13.7% 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 at…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“The Stock Market Is Not The Economy. Simply
put: a robust economy drives earnings growth, and earnings growth propels
equity prices and vice versa. But in understanding the recent market rally, it
is important to recall that the equity market is a forward-looking indicator. In
fact, history suggests the market bottoms ~4 months before a recession ends. So
this rally is looking at the prospects for the economy four months hence in
August—a time period that could experience steady improvement.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:25 PM. Nationwide, there were about 19,000 new-cases today, about 21,000
less than yesterday. (Part of the reduction is probably due to the time I get the data from Johns Hopkins. Numbers will be higher later today.) The 5-day growth-rate was 1.05, i.e., average new cases
are increasing at a rate of 5% per day over the last 5-days. Numbers are improving,
but we still need to see values less than 1.0 for growth rate.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.4% to 2843.
-VIX dipped about 3% to 35.97.
-The yield on the 10-year Treasury rose to 0.641.
RESISTANCE POINTS:
61.8% Fibonacci Retracement: 2950
200-dMA: about 3004
The Prior all-time High: 3386
The markets still seem to be in a holding pattern. Indicators
remain more or less neutral.
Overall, the daily sum of 20 Indicators dipped
from +3 to zero (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations declined from +52
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.
Last 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 29 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.)
The Index is currently down 16% from its all-time high.
Today is day 52 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.
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: +1**
Most Recent Day with a value other than Zero: +1 on 4 May.
(Non-Crash Sentiment is bullish; the Fosback hi/lo Logic Indicator 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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Monday, the SENTIMENT, PRICE & VIX indicators are
bullish; 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.
