"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 (Reuters)
“Millions more Americans filed for unemployment benefits
last week, more than two months after a shutdown of the country to deal with
the coronavirus crisis, pointing to a second wave of layoffs in industries not
initially impacted by closures caused by the pandemic…Initial claims for state
unemployment benefits totaled a seasonally adjusted 2.438 million in the week
ended May 16, down from 2.687 million in the prior week…” Story at…
PHILADELPHIA FED INDEX (Marketwatch)
“The Philadelphia Fed manufacturing index in May rose to
-43.1 from - 56.6 in April, which was the lowest level in forty years. Any
reading below zero indicates worsening conditions.” Story at…
LEI (Conference Board/PRNewsWire)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. declined 4.4 percent in April to 98.8 (2016 = 100), following a
7.4 percent decline in March, and a 0.2 percent decline in February.
"In April, the US LEI continued on a downward
trajectory, after posting the largest decline in its 60-year history in
March," said Ataman Ozyildirim, Senior Director of Economic Research at
The Conference Board. ‘…The sharp declines in the LEI and CEI suggest that the
US economy is now in recession territory.’
‘Business conditions may recover for some sectors and
industries over the next few months,’ added Bart van Ark, Chief Economist at
The Conference Board, ‘But, the breadth and depth of the decline in the LEI
suggests that an imminent re-opening of some sectors does not imply a fast
rebound for the economy at large.’" Press release at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5 PM. Nationwide, there were about 15,000 new-cases today, about 8,000
less than yesterday. The 10-day growth factor remained 1.04 today, indicating
growth in new cases of about 4% per day.
The curve is flattening, but growth in new cases remains. Today’s lower
number may have been caused by me picking up the data earlier.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.8% to 2949.
-VIX rose about 4% to 29.11.
-The yield on the 10-year Treasury dipped to 0.673%.
Most indicators are trend following. Since options are based on future prices, an
indicator based on VIX is probably one of the few that attempts to predict the
future by polling options traders. But for
the most part, indicators can’t foresee the future; they try to confirm the
trend. Where they become valuable is when there is a divergence of some kind, a
disturbance in the force. That’s what is
happening now with my Breadth vs the S&P 500 indicator. It is showing an
extreme bearish divergence as the S&P 500 is too far ahead of the percent
of stocks advancing on the NYSE. This is a strong indication for a top and this
is one of my favorite indicators. Will it be right this time? I don’t know, but
frankly, I am betting on it.
Most indicators are bullish. The daily sum of 20
Indicators slipped from +10 to +8 (a positive number is bullish; negatives
are bearish). The 10-day smoothed sum that negates the daily fluctuations improved
from +28 to +30. (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 bearish, but with the S&P 500 now about
1.7% below its 200-dMA, I need to be flexible. 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 (Friday) 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…
High Momentum is a good “buy” recommendation; here’s the
gain in the last 40-days. It gives a good idea of what
is moving higher, too.
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…
High Momentum is a good “buy” recommendation; here’s the
gain in the last 40-days. It gives a good idea of what
is moving higher, too.
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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.
