"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
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
AUTO SALES (Reuters)
“Several automakers on Tuesday reported stronger-than-expected
May sales in the United States, and the Detroit automakers said they will work
through their annual summer shutdowns to rebuild inventories as demand recovers
from coronavirus shutdowns. The U.S. auto sector has reopened assembly plants
following the shutdown and automakers that reported May sales said they saw
signs of recovery in consumer demand.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5PM. There were 16,000 new cases today, about 5,000 fewer than yesterday.
The 14-day growth factor was 1.04, indicating growth in new cases of about 4%
per day. The curve is flattening rather
fitfully and growth in new cases remains. We need to see a growth-factor below
1.0 before we can be optimistic.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.8% to 3069.
-VIX dipped about 2% to 27.61.
-The yield on the 10-year Treasury rose to 0.685%.
It looks like we are headed for a good old-fashioned
blow-off top. At that point, we’ll probably see a number of top indicators
flashing sell, including Bollinger Bands and RSI. They are both getting closer to a sell, but
it appears that it will take a while longer. Once the rally ends, it’s a guess whether
it will lead to a retest of the low or a smaller pullback, say in the 5% range.
I lean toward a more significant pullback, but it’s just a guess at this point.
The daily sum of 20 Indicators improved from +7 to
+8 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations remained +71. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
A few bear signs remain:
-Breadth on the NYSE vs the S&P 500 index has
drastically diverged from the S&P 500 index in a bearish manner. The Index remains way too far ahead of
breadth, at least using moving average comparisons that have usually proved to
be correct.
-The S&P 500 has been crawling along its Upper trend
line for the last 5 sessions. That may continue or not, but it does tend to
limit the possibility for big jumps higher. It also suggests the odds of a dip
are slightly more than the odds of going higher.
Most indicators remain bullish.
I increased stock holdings to about 30% of the portfolio
total Tuesday, and will add more later. I still doubt the rally so I’ll add
slowly, but there are too many bull signs to be as far under-invested as I have
been.
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 slipped
to 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 30% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
