"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
HORRENDOUS MARKET BREADTH (ZeroHedge)
“This week we had 3 days where the S&P 500 closed
positive and the advance-decline line was negative. Since 1995, there was
only 1 other week where this occurred in June 1997. However, this week is not
comparable in our view, as the negative a/d numbers were pretty close to zero (-6,
-37, -35) that's vs. (-161, -193, -61) this week. This week's a/d numbers were
very significant in terms of size relative to history. Since 1995 there
has been 287 days when SPX closed positive and the a/d was negative. However,
Thursday's -193 was the 3rd lowest ever. Tuesday's was #7 on the list. In
short, while on every previous occasion when stocks inched higher led by just a
handful of stocks, the market tumbles shortly thereafter, what is especially
notable is that the last time we had a cluster of such negative A/D days
with the S&P closing at all time highs was just days before the dot-com
bubble burst.” Commentary at…
https://www.zerohedge.com/markets/horrendous-market-breadth-stinks-high-heaven-screams-imminent-risk
JOHN HUSSMAN COMMENTARY EXCERPT (Hussman Funds)
“It’s worth repeating that the Fed eased aggressively and
persistently throughout the 2000-2002 and 2007-2009 collapses. The psychology
of investors can either amplify the effect of monetary policy, or render it
practically useless… Here and now, market conditions feature 1) historically
extreme valuations, 2) unfavorable dispersion in our measures of market
internals, and 3) unusually “overvalued, overbought, overbullish” conditions.
That combination holds us to a hard-negative market outlook…” Commentary at…
AVOIDING A SECOND WAVE (Hussman Funds)
“If you examine the 1918-1920 influenza pandemic, you’ll
see that it occurred in multiple “waves,” where the second episode was markedly
worse than the first. Though some historians have proposed that maybe the virus
mutated between those two episodes, there’s actually no scientific evidence to
support that…At present, essential [containment measures] include social
distancing, use of outdoor settings where possible, ventilation, encouraging
face masks – particularly in shared public indoor airspace (including
transportation) and also outside if distancing isn’t possible, avoiding the
creation of “network hubs” where previously separated groups are mixed without
other containment measures in place, limiting superspreader events that involve
large numbers of person-to-person interactions, reducing the length of
meetings, using stable student groupings, and ensuring that local “reopening”
decisions are supported by local containment practices and a sustained
reduction in infection rates.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:30 Monday. 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.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1% to 3431, another
all-time high.
-VIX slipped about 0.8% to 22.37.
-The yield on the 10-year Treasury rose to 0.658%.
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. This one certainly
could be a top.
At today’s S&P 500 all-time high, we saw the only 3.2%
of issues on the NYSE make 52-week, new-highs. That’s a low number, but Friday
was even more bearish.
Friday 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. (My numbers are slightly different than some since I
calculate the % ignoring issues that are unchanged in price.)
The S&P 500 is 11.6% 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.
The daily sum of 20 Indicators improved from -3 to -1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +32 +19. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
Friday’s Bull/Bear indicators didn’t change much, nor did
the above daily sum, so I remain bearish in the short and intermediate term.
STILL…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…
MONDAY 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.
