"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
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 5.7 million barrels from the
previous week. At 539.2 million barrels, U.S. crude oil inventories are about
18% above the five year average for this time of year.” Press release at…
My cmt: Oil prices fell after the report came out. Low oil prices continue to hurt the oil
sector.
Here are two opposite opinion pieces on the market: a
bear and a bull. I am trying to be neutral and simply follow the indicators. I
don’t think I have ever seen such a wide dispersion of opinions amongst the
pundits, and not just these two.
40% DROP AHEAD (CNBC)
“I think we’ve got a second leg down and that’s very much
reminiscent of what happened in the 1930s where people appreciate the depth of
this recession and the disruption and how long it’s going to take to recover.”
- A. Gary Shilling, economist and president of A. Gary Shilling & Co. Story
at…
WALL STREET VET PREDICTS A ROCKETSHIP MARKET (CNBC)
“People are woefully underinvested. There’s $5 trillion
in money market funds. So I think the markets are going up. I think they’re
going up a lot more than people think. We may stall here for a while... but I
think you’re gonna get a rocket ship coming in the fall this year.” - Jeff
Saut, chief investment strategist at Capital Wealth Planning
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:20 PM Wednesday. Over the last 2 weeks, new cases have been growing
faster than they were in April. There were about 69,000 new cases today, a new
record for new cases. The steepening
curve is the graphic indication that new-cases are growing at a dramatically
faster rate than we have seen at any time in the US.
-Wednesday the S&P 500 dropped about 0.8% to 3170.
-VIX dropped about 5% to 28.08.
-The yield on the 10-year Treasury rose to 0.666%.
The long-term indicator is one of my oldest indicators
and it has proven to be a reliable sell indicator. It is not as good on the buy-side, but I
usually rely on a retest of the lows, and analysis of that retest, to make buy-decisions.
The Long-Term indicator is made up of 4 areas: Volume, VIX, Price, and
Sentiment with some supporting indicators in each of the 4 areas
Currently, the indicator is close to issuing a SELL
signal. Volume is leaning bearish, but remains neutral; VIX is leaning bearish,
but remains neutral; Price is bearish; Sentiment is elevated, but remains
neutral.
The Price part of the long-term model is pretty good on
its own. This indicator is based on a Ratio of up to down moves (adjusted for
volume) and it is warning of a top. The last 4 times the indicator was as bearish
as now, we saw pullbacks of 34%, 7%, 20% and 10%.
If other areas of the NTSM Long-Term indicator also turn
bearish, I’ll have a clear sell signal. Other indicators are mostly neutral.
The daily sum of 20 Indicators improved from -3 to
+1 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from -39 to -35. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
My Long-term indicator remained HOLD today. I had planned
to increase stock holdings on weakness, but now I am watching my long-term
indicator.
I do wonder if any of this makes any difference. Has the FED overruled all stock market
indicators? Perhaps…we’ll see.
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…
WEDNESDAY 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. I’m watching the Long-Term indicator that is close to issuing a
SELL signal.
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.
