"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
PPI / CORE PPI (Reuters)
U.S. producer prices unexpectedly fell in June as rising
costs for energy goods were offset by weakness in services, pointing to subdued
inflation that should allow the Federal Reserve to keep pumping money into the
economy to arrest a downward spiral…The core PCE price index increased 1.0% on
a year-on-year basis in May, the smallest advance since December 2010.” Story
at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 4:55 PM Friday. 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…and they continue to accelerate. Lock-downs may return. Markets won't like that!
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.7% to 3185.
-VIX dropped about 7% to 27.31.
-The yield on the 10-year Treasury rose to 0.641%.
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) closed
above 50% today.
-The Fosback High-Low Logic Index is 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.
-Long-term new-high/new-low data is bullish.
-Short-term new-high/new-low data is bullish.
-The Utilities ETF (XLU) is under-performing the S&P
500.
-The smoothed advancing volume on the NYSE remained
bullish today.
-The VIX fell Friday and is now Bullish.
-The last hour, 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).
-MACD of S&P 500 price made a bullish crossover 8 July.
-Cyclical Industrials were slightly under-performing
relative to the S&P 500 and appeared to have topped out. Now they appear to
have resumed an up-trend slightly gaining on the S&P 500. That’s a bullish sign.
NEUTRAL
******We’ve been watching this indicator for most of the
week, because it has called the top of the last four corrections. The size of
up-moves has been smaller than the size of down-moves over the last month and
we had Bearish sell signs all week; today, it improved to neutral territory. It
is still closer to a sell-signal than a Buy-signal, nut unless it declines
again, the bearish sign is over.
-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. (If the downturn deepens
and becomes more extended, I’ll switch to crash sentiment; that would take a
much lower value to issue a buy-signal.)
-Bollinger Bands are close to bear signals, but remain
neutral. RSI is neutral.
-Overbought/Oversold Index, a measure of advance-decline
data, is neutral.
-My Money Trend indicator is now
headed up.
-Over the last 10 and 20-days, the number of up-days is stretched
(slightly bearish) but it remains neutral for now.
-The percentage of 15-ETFs that are above their
respective 120-dMA was 60% Friday (same as last week). That’s a mid-level
number so we’ll just call it neutral. (This is a new indicator and I don’t have
much experience with it
BEAR SIGNS
-MACD of stocks advancing on the NYSE (breadth) made a bearish
crossover 11 June. This indicator is
deteriorating.
-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.)
On Friday, 21 February, 2 days after the top of this
pullback, there were 10 bear-signs and 1 bull-sign. Now there are 2 bear-signs and
12 bull-signs. Last week there were 4 bear-signs and 8 bull-signs.
The daily sum of 20 Indicators improved +1 to +7
(a positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from -19 to -9. (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, but it
improved. Given that most indicators are bullish…“Happy Days are here again!”
I still wonder if any of this makes any difference. Has the FED overruled all stock market
indicators? Perhaps…we’ll see. I plan to add to stock holdings on Monday.
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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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.
I plan to add to stock holdings on Monday.
I am now a skeptical bull.
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.
