SMALL BUSINESS OPTIMISM (Business Insider)
“US small businesses expect that their sales will
continue to suffer from sweeping lockdowns to combat the coronavirus pandemic,
but think the economy will pick up in the next six months as some states begin
to reopen. Small business optimism slumped 5.5 points to 90.9 in April…”
Story at…
CPI (MarketWatch)
“One thing anxious Americans don’t have to worry about as
the COVID-19 pandemic shuts down large chunks of the economy is inflation.
Consumer prices sank 0.8% in April, led by tumbling gasoline prices, marking
the biggest decline since the 2008 Great Recession.” Story at…
SQUARE ROOT RECOVERY (MarketWatch)
“…the Ned Davis team is that financial markets are, so
far, confirming no “V” is in the works. That would take a “convincing breadth
thrust,” meaning a recovery in
stocks that’s much more widespread than the one that seems to
be under way, which is largely concentrated in technology.” Story at…
BEAR MARKET RALLY OR NEW BULL (ZeroHedge)
“BofA's quant team conveniently notes that factors can
help. Consider that during the early stages of each of the prior real bull
markets, the bank's Low Price factor - read “dollar stocks”, or
“distressed equities” - was the best performing factor, but did not lead
in bear market rallies. Alternatively, prior bear market rallies saw mixed
leadership, and "Low Price" traditionally was outperformed by such
factors as Value, Momentum and Growth…Since 23 March lows, Value (Price/Book
and Fwd P/E) and Risk (Estimate Dispersion and Beta)
have led. But it is the mediocre performance of Low Price stocks,
i.e. distressed equities from the bottom, which to BofA suggests that this is,
indeed, just another bear market rally.”
Commentary and Charts from…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:50 PM. Nationwide, there were about 22,000 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, but numbers keep flopping around. The 10-day growth factor was
about 1.05 today.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 2.1% to 2870.
-VIX jumped about 20% to 33.04.
-The yield on the 10-year Treasury slipped to 0.671.
Today, we got some more evidence that the rally may be
over. The S&P 500 broke its lower
trendline; late-day-action was pretty bad as the Index fell 2% after 1PM and
1.5% of the drop came in the last hour; my basket of Market Internals flipped
to Bearish; Smart Money (late-day-action) remained bearish; short-term, New-High/New-Low
data turned bearish; Money Trend turned down. But wait, there’s more…
As we noted yesterday, the S&P 500 reached 2944 during
the day Monday, and that’s very close to the 61.8% Fibonacci retracement level.
We also noted that a significant sell signal developed when Breadth on the NYSE vs the S&P 500
index displayed a significant divergence from the S&P 500 index.
Overall, the daily sum of 20 Indicators declined
from +4 to -3 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +62 to +53.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
I sold Microsoft (gain 5%) this afternoon before I ran
some errands as the markets were slipping. I was surprised to see the markets
tank shortly afterward.
I am still about 30% invested in stocks. That’s my crash stock-allocation
level, but I still don’t know if we’ll see a crash. (Crash for me is about a
50% drop.) Since I don’t know what the
future holds, I am taking a conservative position.
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.
If the selloff continues, I'll sell IBB. They will throw the baby out with the bathwater if we retrace down.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
to 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 30% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
