"This imaginary person out there - Mr. Market - he's
kind of a drunken psycho. Some days he gets very enthused, some days he gets
very depressed. And when he gets really enthused, you sell to him and if he
gets depressed you buy from him. There's no moral taint attached to that."
- Warren
Buffett
EIA CRUDE OIL INVENTORIES (Energy Information
Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 5.0 million barrels from the
previous week. At 526.5 million barrels, U.S. crude oil inventories are about
10% above the five year average for this time of year.” Weekly Status Report
Highlights available at…
THE BIG FOUR RECESSION INDICATOR (Advisor Perspectives)
“There is…a general belief that there are four big
indicators that the committee [NBER Business Cycle Dating Committee] weighs
heavily in their [recession] cycle identification process. They are: Nonfarm
Employment; Industrial Production; Real Retail Sales; and Real Personal Income
(excluding Transfer Receipts) … Here is a percent-off-high chart based on an
average of the Big Four.” - Jill
Mislinsky.
My cmt: It is clear that we are in recession and it is likely
to last 2 quarters to make it an “official” recession. This is probably
meaningless now, as far as a stock
market recovery is concerned, since
everyone knows it. Will it be a short quick recovery, “V”-style, or will it
drag on? Here’s what the FED said: “U.S. Federal Reserve Chair Jerome Powell
warned Wednesday of the threat of a prolonged recession resulting from the
viral outbreak and urged Congress and the White House to act further to prevent
long-lasting economic damage.” From…
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“Monday’s huge rally saw 90% of the volume going into
stocks that were up on the day. That reversed the previous 90% down day last
week and is another bullish sign for the intermediate-term. Interestingly, the
most beaten down sectors led the rally. In other words, the “have nots” were
all the rage. I am skeptical. Until proven otherwise, except for energy, my
view is that big rallies in those sectors are selling opportunities.”
Commentary at…
TECHNICALLY SPEAKING EXCERPT (Real Investment Advice)
“With the rally and breakout, yesterday, we can
re-evaluate those risk/reward brackets.
5.5% to last week’s lows vs. 1.4% to the 200-dma. Risk/reward
negative.
-7.6% to the 50% retracement/50-dma vs. 5.6% to the March
peak. Risk/reward negative.
-16.9% to the April 1st lows vs. 9.1% to January’s
bottom. Risk/reward negative.
-24.1% to the March 23rd low vs. 14.5% to all-time highs: Risk/reward
negative.
While it may not seem like it at the moment, the risk of
a downside retracement, as we head into summer months, outweighs the current
upside. Importantly, this does NOT mean the markets can’t rally to
all-time highs. It is possible. It is also just as likely that things do
go as smoothly as planned, and we wind up retesting March lows. Such is why we
have to weigh the risk and reward of chasing markets.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:45 PM. Nationwide, there were about 24,000 new-cases today, about 5000
more than yesterday. The 10-day growth factor climbed to about 1.04 today,
indicating growth in new cases of about 4% per day. The curve is flattening, but growth in new
cases remains.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 1.7% to 2972.
-VIX dropped about 8% to 27.99.
-The yield on the 10-year Treasury dipped to 0.683%.
My Breadth vs the S&P 500 indicator is still showing
a bearish divergence. This is a strong indication for a top and this is one of my
favorite indicators. This indicator is only
rarely more than a week early; however, even the best indicator isn’t always
correct. We have to consider that the
indicator may be wrong. This indicator compares changes in Breadth, measured as
issues advancing on the NYSE, to changes in the S&P 500. Another way of
considering this phenomenon might be to compare the S&P 500 to the NYSE
Composite, since the composite tracks all issues on the NYSE.
If we examine a 1-year chart of the Composite Index and
the S&P 500 Index, we note that there was roughly a 7% underperformance by
the Composite Index at the top of the current correction.
One interesting comparison would be to look at data from
the Financial crash (using 3-month charts.)
The 2008-2009 crash bottomed in March of 2009. Two months after the March
low, the NYSE Composite index was outperforming the S&P 500 by 1.5%. Now, 2
months after the Coronavirus low on 23 March, the NYSE Composite index is
underperforming the S&P 500 by nearly 6%. I suppose this is just another
argument for no “V” recovery. Right now, the S&P 500 seems to be telling us
a different story.
Most indicators are bullish. The daily sum of 20 Indicators
improved from +5 to +10 (a positive number is bullish; negatives are
bearish). The 10-day smoothed sum that negates the daily fluctuations improved
from +23 to +28. (These numbers sometimes change after I post the blog based on
data that comes in late.) Most of these indicators are short-term.
The S&P 500 climbed above 100-day moving average
(2975), but retreated in the afternoon. The 200-dMA is now about 3000.
I am currently bearish, but with the S&P 500 now less
than 1% below its 200-dMA, I need to reconsider. I’ll turn into a Bull and BUY
if the S&P 500 can close above its 200-dMA on consecutive days.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2**
(Non-Crash Sentiment is bullish; Breadth vs S&P 500 is
bearish; Money Trend/S&P 500 Spread is bearish; Smart Money is overbought,
a bearish sign.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
RECENT POSITIONS
-SDS-ETF (2x short the S&P 500). Opened Tuesday. I’ll
close the short tomorrow (Thursday) if the market moves higher.
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to BULLISH 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 25% invested in
stocks + 5% 2xSHORT. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
