“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"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
NEW HOME SALES (Reuters)
"Sales of new U.S. single-family homes raced to a near
13-year high in June as the housing market outperforms the broader economy amid
record low interest rates and migration from urban centers to lower-density
areas because of the COVID-19 pandemic…New home sales rose 13.8%..." Story at...
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“We now have a very clear line in the sand drawn. If the
bulls are to win, they will quickly close above the 11,100 level for a
day and a week. Should the bears cede control, the downside looks to be a
minimum of the 9000s…As you know, the other major stock market indices do not
look anything like the NASDAQ, however, I believe that that if the NASDAQ 100
begins to rollover and the others cannot immediately surge like they did on
Tuesday, we will see an across the board bout of weakness for stocks into
August.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 9:00 PM Friday. There were about 80,000 new cases reported today, near
the daily record for new cases. The 14-day growth factor was 1.06, indicating 6%
growth in new cases each day over the last 2-weeks.
-Friday the S&P 500 fell about 0.6% to 3216.
-VIX slipped about 0.9% to 25.84.
-The yield on the 10-year Treasury rose slightly to 0.591%.
The daily sum of 20 Indicators declined from +5 to -4
(a positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +37 to +26. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
Here’s the Friday run-down of some important indicators.
BULL SIGNS
-The 50-dMA of stocks
advancing on the NYSE (Breadth) is above 50%.
-100-dMA of Breadth (advancing stocks on the NYSE) is above
50%.
-The Fosback High-Low Logic Index is STILL bullish
and is giving BUY signal. This indicator also gave a BUY signal 2 days after the
23 March bottom.
-The 5-10-20 Timer System remained BUY, because the
5-dEMA and 10-dMA are above the 20-dEMA.
-My Money Trend indicator is now
headed up.
-MACD of S&P 500 price made a bullish crossover
8July.
-MACD of stocks advancing on the NYSE (breadth) made a bullish
crossover 23 July.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500 by a lot – a bull sign.
- The Smart Money (late-day action) is bullish. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-The percentage of 15-ETFs that are above their
respective 120-dMA was 87% Friday, bullish.
NEUTRAL
-Short-term new-high/new-low data is neutral.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but for now, it remains in neutral territory.
-VIX is Neutral.
-The S&P 500 is neutral relative to its 200-dMA. It
is not too diverging too far above or below it.
-Statistically, the S&P 500 gave a panic-signal, 11
June. A panic signal usually suggests more to come. We did not see big negative follow-thru so
I’ll put this one in the negative category.
-Non-crash Sentiment is neutral.
-Bollinger Bands remain neutral. RSI is neutral.
-Overbought/Oversold Index, a measure of advance-decline
data, was overbought this week, but is now neutral.
-Over the last 10 and 20-days, the number of up-days is stretched
(slightly bearish) but it remains neutral for now.
-The Utilities ETF (XLU) is under-performing the S&P
500, but it is falling so let’s call this one neutral.
BEAR SIGNS
-Long-term new-high/new-low data is bearish.
- The smoothed advancing volume on the NYSE switched to
Bearish today.
- Breadth on the NYSE vs the S&P 500 index has
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. (This indicator has been negative for a while and I’m losing
confidence in it. It called a top on 8 June. Was it right? We’ll see.)
On Friday, 21 February, 2 days after the top of this
pullback, there were 10 bear-signs and 1 bull-sign. Now there are 10 bull-signs
and 3 bear-signs. Last week there were 9 bull-signs and 3 bear-signs.
As of Friday, I don’t see major divergences in the
internals. It doesn’t look like this
will be a major downturn. The S&P 500 is 5.7% above its 200-dMA. I wouldn’t
be surprised to see the Index fall to the 200-day.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
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 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.
