"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
INDUSTRIAL PRODUCTION (Marketwatch)
(I picked up last month’s story yesterday. Here’s the latest.)
“Industrial production rose 5.4% in June, the second gain
after a steep drop in March and April, the Federal Reserve reported Wednesday.” Story at…
EIA CRUDE INVENTORIES (Energy Information Administration)
(I picked up last week’s press release yesterday. Here’s the latest.)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 7.5 million barrels from the
previous week. At 531.7 million barrels, U.S. crude oil inventories are about
17% above the five-year average for this time of year.” Press release at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:40 PM Wednesday. There were about 71,000 new cases today. 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…and they continue to accelerate.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.9% to 3227.
-VIX fell about 6% to 32.19.
-The yield on the 10-year Treasury rose to 0.632%.
The Big Picture. I am usually focused on minutia and pay
little attention to the news. I follow the small details of market internals,
divergence, spreads, etc. Currently, they are mostly giving buy signals as buying
continues to push the markets higher. The Big Picture paints a different
picture. The S&P 500 is now 4.7%
below its all-time high of 3386 on 19 Feb. With earnings down and 18-million
unemployed, should markets be valued at the nearly the same rate as they were
in February? Of course not. Even looking out 6-months, the market is
over-shooting to the high side. That doesn’t mean this rally can’t go further.
It can.
So, it’s OK to buy now, just be aware that we will see
further pullbacks and it seems likely that better buy points will occur later.
Still, I joined the FOMO (fear of missing out) crowd and bought Industrial Cyclicals
(XLF-ETF). I just need to remember that purchases now are riskier and I’ll
watch the market carefully for signs of a turn-around.
I added XLI today, because Industrials have been outperforming
for the last 2 months and I already own a big technology position in Microsoft.
Monday was the 6th “Distribution Day” in
the last 6-weeks and that’s a bear sign.
VIX came down, but didn’t give a buy signal – it remains
neutral.
Bollinger Bands are close to a sell, but RSI isn’t. I
use these signals together.
The size of up-moves vs down-moves (previously indicating
sell) shows that the size of up-moves has been smaller than the size of
down-moves over the last month, but the indicator remains in neutral territory,
but just barely. It declined today. Unless it declines further, it remains
neutral.
I have very few negative indicators, so if we’re going to
see another big drop it is likely to be news related, i.e., impossible to time.
The daily sum of 20 Indicators improved from +1 to
+6 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from +6 to +15. (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.
The Short-Term indicator gave a buy signal so, as noted
above, I did add to stock holdings thru an ETF; however, it was not enough to
move my total percentage invested in stocks more than a couple of percent.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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.
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.
