"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
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“Another day, another surge by the NASDAQ 100 without the
rest of the indices joining the party. You know the few stocks. Apple, Amazon,
Netflix, Microsoft, Nvidia, Facebook, Google and a few more. The Dow
Industrials, S&P 500, S&P 400 and Russell 2000 are not behaving well.
This is not, not, not 1999 and the Dotcom Bubble, but, but, but this is still
dangerous behavior that can lead to consequences tomorrow, next month or next
year…” Commentary at…
CALIFORNIA CLOSING DOWN (CNBC)
“California Gov. Gavin Newsom ordered all dine-in restaurants,
bars, movie theaters, museums and other indoor businesses across the
state to close Monday as Covid-19 cases continue to climb… In addition to
the statewide order, Newsom said he would also close indoor operations for
fitness centers, worship services, personal care services, malls, offices, hair
salons and barbershops for all counties on California’s monitoring list, which
represent 80% of the state’s population.” Story at…
US SLOWING SAYS FED PRESIDENT (MarketWatch, 1:50 PM)
“The U.S. economy is slowing down after a burst of
activity in May, said Dallas Fed President Robert Kaplan on Monday. "The
economy did bottom in April, we started to grow again toward the end of April
and certainly into May," Kaplan said, in a talk at the National Press
Club. There was even a brief spell of "double-digit" growth that
lasted until the second week of June, he said, but now growth is slowing down.
Part of this is due to the resurgence of COVID-19, which is "muting
growth," Kaplan said.
My cmt: The above report tanked the markets. After it
came out (at the market high) the S&P 500 dropped more than 2%.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30 PM Monday. There were about 60,000 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
-Monday the S&P 500 was down about 0.9% to 3155.
-VIX rose about 18% to 32.19.
-The yield on the 10-year Treasury dropped to 0.619%.
I had planned to add to stock holdings today and I was
looking at XLK and possibly Apple, since Tech and Biotech seem to be all that
is working. When I looked in the afternoon, the markets were falling fast so I
decided to hold off, especially since tech was leading the selloff.
The jump in VIX should be very concerning for the bulls.
This indicator isn’t bearish yet, but it moved a lot toward bearish today.
An interesting sell signal from Tom McClellan regarding
the 7-Day VIX Rate of Change (ROC): “...An upward crossing through zero often
(but not always) marks an important top for stock prices.” We got a cross today,
but there have been several crosses recently that haven’t correctly predicted a
dip.
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.
Unless it declines again, this bearish sign is over.
I have very few negative indicators, so if we’re going to
see another big drop it is likely to be virus related, i.e., impossible to
time.
The daily sum of 20 Indicators declined from +7 to
+4 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from -9 to +4. (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 will wait to see what markets are doing before adding
to stock holdings.
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.
*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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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.
