“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
DURABLE GOODS ORDERS (MarketWatch)
“Orders for durable goods lasting at least three years
surged 11.2% in July largely because of strong consumer demand for new cars and
trucks, but business spending outside the auto industry was softer and investment
grew more slowly.” Story at…
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 4.7 million barrels from the
previous week. At 507.8 million barrels, U.S. crude oil inventories are about
15% above the five year average for this time of year.” Press release at…
MASKS WORK (S.C. Dept of Health & Env. Control)
“Wearing a mask every day in public is critical, however,
not all face coverings provide the same protection. A recent study by Duke
University shows that neck gaiters may be among the least effective types of
face coverings for preventing the spread of respiratory droplets.”
JOB OPENINGS (TracktheRecovery.org)
My cmt: Job openings are considered a good “tell” for the
economy. This is not a good sign and may suggest a double-dip recession. Similar worries
were shown in some of the other charts, such as Small Business revenue, Small
Business closings, etc.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
6:15 Wednesday. Total US numbers are on the left axis; daily numbers are on the
right side of the graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 1% to 3479, another
all-time high.
-VIX rose about 6% to 23.27. (The Options Boys are worried; VIX was UP
today along with the Index. That doesn’t happen often.)
-The yield on the 10-year Treasury rose to 0.697%.
Bollinger Bands were “overbought” and RSI was only a whisker
short of “overbought.” We keep seeing more negative signs while buying
continues in the major indices, but the majority of issues on the NYSE are falling.
Only 46% of issues on the NYSE advanced in the last
2-weeks. Stated another way, less than half the issues on the NYSE have gone up
over the last 2-weeks and the market keeps powering higher – not likely to last
much longer. Only 51% of issues have gone up over the last 150-days. (If it
drops below 50%, I’ll blow Taps.
Today was a statistically significant up-day. That just
means that the price-volume move exceeded my statistical parameters. Statistics
show that a statistically-significant, up-day is followed by a down-day about
60% of the time.
Statistically-significant, up-days almost always coincide with tops, but
not all statistically-significant, up-days occur at tops. I suspect this is the
top, because we see even more bearish evidence today. Even the charts are
turning sour. The S&P 500 chart looks parabolic now.
VIX was up 6% today, a bearish sign given that the
S&P 500 was up too. Also, the 7-day ROC of VIX crossed above zero. That is
a bearish sign, too. “An upward crossing through zero often (but not always)
marks an important top for stock prices.” – Tom McMillan. We saw a bounce
above zero back in May with no downturn. Now we see a lot of other bearish
indicators, so it’s time to pay attention (if you weren’t already) for those who have been riding the
rising tide of stock prices.
At today’s S&P 500 all-time high, we saw the only 3% of
issues on the NYSE make 52-week, new-highs. In the last 4 days, we’ve seen 4
new all-time highs for the Index and on 3 of those days we’ve seen the
following % of issues on the NYSE make 52-week, new-highs: 2.97%, 2.7% and 2.2%.
Any number below 3% is bearish stuff. See prior blogs for more details.
The S&P 500 is 13% above its 200-dMA. Values in the
10-15% range are sell-signal. As the market stretches higher, a bigger fall
becomes more likely.
Another warning sign today: there have only been 5
down-days in the last 2 weeks. That’s mildly bearish; one more up-day, Thursday,
will throw this indicator into a rare, very-bearish, sell-signal. The last time
it we saw 4-down-days in a month, the S&P 500 dropped 7%.
The daily sum of 20 Indicators improved from -2 to +2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +6 +2. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term and many are trend following, i.e., they are
not top-indicators, so they are reflecting the overly bullish market.
I remain bearish in the short and intermediate term. I
think, it’s time to Short.
I have been surprised at how long the markets have been
able to advance, but soon (maybe starting tomorrow) ...
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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained NEGATIVE 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.
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 30% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 30% is a very conservative position that I
re-evaluate daily. The XLE has been a loser for me since I was too early. It is
still yielding over 10%, so I have to remind myself to be patient.
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.
