“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
EXISTING HOME SALES (Marketwatch)
“Sales of previously-owned homes in the U.S. rose 24.7%
between June and July to a seasonally-adjusted annual rate of 5.86
million, the National Association of Realtors reported Friday. It was
the second consecutive month in which the monthly increase was the largest on
record, according to the trade group. Compared with a year ago, sales were up
8.7% in July.” Story at…
CASS FREIGHT INDEX - JULY (CASS Information Systems)
“As a measure of economic activity, Cass Freight Index
Shipment volumes dropped 13.1% vs year-ago levels…better than last month’s
-17.8% y/y change, but still well below where one wants to see it… the Cass
Freight Index showed continued improvement in July, and we will continue to
watch for progress in the third quarter. 2019 freight volumes are a good
benchmark to work towards. The rail comps may get back to even by the end of
the year, but it’s unclear if overall shipment volumes will be able to
accomplish this without further government stimulus or another outside boost.”
Press release at…
EXCESSIVE TAIL RISKS (MarketWatch)
“We believe that the rally has now extended well beyond
levels justified by the state of the economy, and with little regard for the
myriad of risk factors looming on the horizon.” - Jeffrey Talpins, founder of
hedge fund Element Capital
PRICE ACTION LIKE THE DOT COM ERA (Heritage Capital)
“The price action looks like late 1999 and early 2000
with the index scoring new high after new high with more stocks down than up
and the amount of shares trading in stocks going down swamping those in stocks
going up. This is not the healthiest of environments, but price is always the
final arbiter. The Fab Five+ scare me, even though we own some of them along
with the index. At some point they will correct very hard and very quickly…Anyone
opining that the stock market is totally healthy when less than a dozen stocks
are holding up the major indices and masking some underlying weakness are
simply ignoring history.” Paul Schatz, President, Heritage Capital. Commentary
at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 6:45 Friday. Total US numbers are on the left axis. I’ve plotted the daily
numbers on the right side of the graph with a 10-dMA of daily numbers in Green.
(Numbers of new cases are higher today, probably because I got them late.)
Thomas Frieden, MD, former director of the CDC,
said "COVID is now the No. 3 cause of death in the U.S. -- ahead of
accidents, injuries, lung disease, diabetes, Alzheimer's, and many, many other
causes." Story at…
https://www.thestreet.com/mishtalk/economics/covid-is-now-the-third-leading-cause-of-death-in-the-us
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.3% 3397 to another
all-time high.
-VIX rose about 0.8% to 22.54.
-The yield on the 10-year Treasury slipped to 0.636%.
Repeating: I took some profits recently. See “Current
Market Position” below for details.
Today we got the illusive bear-signal based on new-highs
at an all-time high. As I previously noted, the S&P 500 made a new all-time
high Tuesday, while only 3.3% of all issues traded on the NYSE made new
52-week, new-highs. Today, the stats got worse. S&P 500 made a new-high Friday
and only 2.2% of all issues traded on the NYSE made new-highs. The 5-year
average shows that 6.7% of NYSE issues typically make new highs at an S&P
500 new, all-time high. The last time we saw a value close to 2.2% (2.3% on 21
May 2015) the S&P 500 was at a top that preceded a 12% correction. In Sept 2018, 2.9% of issues on the NYSE made
new-highs. That top preceded a 20%
correction.
Here’s the Friday run-down of some important indicators.
These tend to be both long-term and short-term so they are somewhat different
than the 20 that I report on daily.
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 size of up-moves has been larger than the size of
down-moves over the last month.
-VIX is falling steeply.
-The 5-10-20 Timer System remained BUY, because the 5-dEMA
and 10-dMA are above the 20-dEMA.
NEUTRAL
-The S&P 500 is outperforming the Utilities ETF (XLU),
but its outperformance is falling so let’s call this one neutral.
-Non-crash Sentiment is neutral.
-Bollinger Bands remain neutral, but are close an
overbought reading.
-Overbought/Oversold Index, a measure of advance-decline
data is neutral. It was overbought Monday, but I’ll call it neutral since it has
dropped.
-Breadth on the NYSE vs the S&P 500 index diverged
from the S&P 500 index and has been giving a sell signal since 11 May. 31
July it finally turned neutral.
-Long-term new-high/new-low data is neutral.
-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.
-The Fosback High-Low Logic Index switched to neutral.
-There have been 6 up-days over the last 10 days and 14
up-days over the last 20-days. This is neutral.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500 – but not by enough to send a signal.
BEAR SIGNS
-Only 2.2% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made a new all-time-high.
-The S&P 500 is 10.5% above its 200-dMA. Values in
the 10-15% range are sell-signal. While this could signal a major top, it could
presage just a 3-5% pullback. The Index was 11.5% above its 200-day when the
Coronavirus crash began. It was 8.6% above its 200-day before the 6% retreat in
July of 2019. The “%-above-the-200-day” is pretty strong signal and it suggests
that we will see at least some choppy trading and perhaps a more significant
pullback.
-Only 41% of the 15-ETFs that I track have been up over
the last 10-days – bearish.
-The percentage of 15-ETFs that are above their respective
120-dMA was 100% Friday. That’s probably, too bullish. When this value is 100%,
corrections follow, but this signal can be a month or more early so it’s not a
good timing indicator.
-MACD of stocks advancing on the NYSE (breadth) made a bearish
crossover 31 July.
-MACD of S&P 500 price made a bearish crossover 19
August.
-RSI is neutral, but it gave an overbought signal Monday.
It remains close to overbought now.
-The 10-dMA of stocks
advancing on the NYSE (Breadth) is below 50%.
-Short-term new-high/new-low data is bearish.
-The Smart Money (late-day action) is headed sharply down.
This indicator is based on the Smart Money Indicator (a variant of the
indicator developed by Don Hayes).
-My Money Trend indicator is
headed down.
-The smoothed advancing volume on the NYSE remained
Bearish.
On Friday, 21 February, 2 days after the top of this
pullback, there were 10 bear-signs and 1 bull-sign. Now there are 12 bear-signs
and 5 bull-signs. 2 weeks ago, there were 11 bull-signs and 5 bear-signs.
The daily sum of 20 Indicators (somewhat different than
the above indicators) declined from -1 to -3 (a positive number is bullish;
negatives are bearish). The 10-day smoothed sum that smooths the daily
fluctuations slipped from +48 +32. (These numbers sometimes change after I post
the blog based on data that comes in late.) Most of these indicators are short-term.
Looks like a correction to me!
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 declined
to 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.
I took profits in Microsoft last week and the XLI-ETF yesterday.
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.
