"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
JOBLESS CLAIMS (CNBC)
“New filings for unemployment claims totaled just shy of
3 million for the most recent reporting period, a number that while still high
declined for the sixth straight week, according to Labor Department figures
Thursday. The total 2.981 million new claims for unemployment insurance filed
last week brought the coronavirus crisis total to nearly 36.5 million, by far
the biggest loss in U.S. history.” Story at…
PUTTING A PRICE ON THE S&P 500 (Real Investment
Advice)
“Currently, with most earnings reported, we have a
reasonable estimate of first-quarter earnings for 2020. Our “better than best”
case scenario uses that first-quarter data point and grows it at the prior
earnings growth (4.85%) rate going forward…The fair value for the S&P 500
using the earnings experience of the 2001 recession is 1980. The fair value for
the S&P 500 using the earnings experience of the 2008/09 recession is 1926.
Both experiences imply an approximate 30%+ decline from current levels to reach
fair value.” Analysis at…
MARKETS ARE OVERPRICED (Bloomberg)
“The biggest names in finance are coming around to a view
that seemed unlikely a few weeks ago: Stocks are vastly overvalued.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 10PM. Nationwide, there were about 30,000 new-cases today, about 8,000 more than yesterday. (I sometimes up-date the data later in the evening and that
may make some of today’s stats seem odd compared to what I may have written
yesterday.) Growth is slowing as indicated by the curve diverging from the red
line. Today's numbers are probably higher due to my picking up the data late.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.2% to 2853.
-VIX fell about 8% to 32.61.
-The yield on the 10-year Treasury rose slightly to 0.625.
Overall, the daily sum of 20 Indicators declined
from -5 to -7 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +35 to +18.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
I am currently very bearish. While many are looking at
this pullback as a medical event that will be “cured” as soon as we have some
good reopening or treatment news, there could be more to it. Valuations are extreme and a
reversion-to-mean could be much more painful. This isn’t a prediction; just a
precaution.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +0**
(Non-Crash Sentiment is bullish; Breadth vs the S&P 500
is bearish (-1).
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
BEARISH 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. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
