“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
DURABLE ORDERS
Orders for durable goods lasting at least three years
rose strongly in June for the second straight month after historic declines in
the early spring, but the momentum might be hard to sustain in the wake of more
coronavirus cases and somewhat tighter government restrictions. Orders climbed
7.3% last month, the
government said Monday.” Story at…
MARKIT FLASH U.S. COMPOSITE PMI (Markit Economics)
“While the stabilisation of business activity in July is
welcome news, the lack of growth is a disappointment. Moreover, a renewed
acceleration in the rate of loss of new business raises concerns that demand is
faltering. Many companies, notably in consumer-facing areas of the service
sector, linked falling sales to re-imposed lockdowns.” - Chris Williamson,
Chief Business Economist at IHS Markit.” Press release at…
EARNINGS (FACTSET)
“The blended (combines actual results for companies that
have reported and estimated results for companies that have yet to report)
earnings decline for the second quarter is -42.4%, which is smaller than the
earnings decline of -44.1% last week. Positive earnings surprises reported by
companies in the Health Care and Information Technology sectors were mainly
responsible for the decrease in the overall earnings decline during the week.
If -42.4% is the actual decline for the quarter, it will mark the largest
year-over-year decline in earnings reported by the index since Q4 2008
(-69.1%). It will also mark the fifth time in the past six quarters in which
the index has reported a year-over-year decline in earnings.” Commentary
at...
My cmt: Don’t worry, it’s ok because they exceeded
estimates. Note that a year before the epidemic, earnings were declining.
Ruh-roh!
INVESTORS WORRY ABOUT EXUBERENCE (Reuters)
“The equity market’s leadership and frenzied buying by
retail investors “is classic bear market rally activity,” said Gundlach, and
feels similar to 1999 - which was prior to the dotcom bubble bursting.
However, it is “way worse because we don’t have the
ability to cut interest rates” and have “used all the tools that are typically
reserved for fighting economic problems,” he said…
…“In the U.S. right now we are seeing a bit of ‘what does
this mean?’” said Jim Schaeffer, head of leveraged finance at Aegon Asset
Management. “We sold on the complete unknown and rallied on hope.” Story at…
SCIENTISTS STRUGGLE WITH SILENT SPREAD (CBC)
“One of the great mysteries of the novel coronavirus
is how quickly it rocketed around the world. It first flared in central China
and within three months was on every continent but Antarctica,
shutting down daily life for millions. Behind the rapid spread was something
that initially caught scientists off guard, baffled health authorities and
undermined early containment efforts: The virus could be spread by seemingly
healthy people.” Interesting article at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:19 PM Monday. The US averaged about 57,000 new cases per day over the
last three days. Down somewhat from recent levels. We’ll have to see if this is
just the “weekend effect” or a real reduction.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3239.
-VIX slipped about 4% to 24.74.
-The yield on the 10-year Treasury rose to 0.612%.
Today there was a Bearish cross on MACD for S&P 500
price, while the MACD of NYSE Breadth got more bullish. I’m not sure which one
to believe. I supposed I remain a skeptical bull.
The daily sum of 20 Indicators declined -4 to -3
(a positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +26 to +19. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
I don’t see major divergences in the internals. Utilities fell relative to the S&P 500 –
no sign of a pullback in that indicator. Friday’s indicator review looked
pretty good. Looks like the markets can go 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.
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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 40% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 40% is a conservative position that I re-evaluate
daily. It is not far below my fully invested position which would be between
50-60%.
As a retiree, 50% in the stock market is about fully
invested for me – it is a cautious and conservative number. If I feel very
confident, I might go to 60%; had we seen a successful retest of the bottom,
80% would not have been out of the question.
