"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
FOMC MINUTES (CNBC)
“At the July 28-29 session, the Federal Reserve’s
policymaking arm voted to keep short-term interest rates anchored near zero,
citing an economy that was falling short of its pre-pandemic levels. Officials
at the meeting “agreed that the ongoing public health crisis would weigh
heavily on economic activity, employment, and inflation in the near term and
was posing considerable risks to the economic outlook over the medium term,”
the meeting summary stated.” Story at…
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 1.6 million barrels from the
previous week. At 512.5 million barrels, U.S. crude oil inventories are about
15% above the five year average for this time of year.” Press release at…
Some bearish opinion pieces…
EARNINGS DON’T SUPPORT THE BULLISH THESIS (Real
Investment Advice)
“The market is currently trading at absurd valuation
levels. There is little to support the idea of a “V-shaped” recovery
at this point. Investor “psychology” will collide with “reality,” and
the rush to exit will not be a slow and methodical process. Instead, much
like we saw in March, it will be a stampede with little regard to price,
valuation, or fundamental measures. The exit will become very narrow.”
Commentary at…
MARKET TIMER MCCLELLAN TURNS BEARISH (MarketWatch)
“Tom McClellan, publisher of the McClellan Market Report,
has turned bearish on stocks for short- and intermediate-term trading styles
after Tuesday's close, as the S&P 500's SPX, 0.23% rise to its first
post-COVID-19 record close, and yet another record for the Nasdaq
Composite COMP, 0.35%, belied the weakness seen in the broader
stock market.” Story at…
BULLISHNESS IS EXTREME (MarketWatch)
“The U.S. stock market’s five-month rally is coming to an
end. Of course I don’t know when. That’s important to acknowledge, since this
spring I presented arguments for why the market’s March lows could be retested
in mid-June or mid-August.
As many of you have emailed me recently to remind me, neither scenario came to
pass. Nevertheless, conditions are even stronger now for a correction.” – Mark
Hulbert. Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 4:50 Wednesday. 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.
I saw a Biden ad yesterday where he claimed Covid was
getting worse. While he complains about Trump’s response to the virus (and most
of us could find something about Trump’s response we don’t like) no Democratic
political leader said anything about the virus beforehand. The Democrats are
fear mongering the Covid stats – sorry, Joe, the number are getting better, not
worse.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 0.4% 3375.
-VIX rose about 5% to 22.54.
-The yield on the 10-year Treasury rose to 0.683%.
Based on chart patterns and some of the bearish
indicators it seems like we may have made a top. As long as Covid numbers of new cases are
falling, I don’t expect a huge pullback. I’m guessing that the S&P 500 will
drop to the 50-dMA, about 5% lower than today’s close.
The daily sum of 20 Indicators slipped from -1 to -3 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +63 +54. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
The wild card is the Fed.
Can they hold off normal market action? We’ll see.
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
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.
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.
