“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
JOBLESS CLAIMS (CNBC)
“The number of Americans who filed for unemployment
benefits for the first time came in above 1 million for the 22nd time in
23 weeks as the economy struggles to recover from the coronavirus
pandemic, the Labor Department said Thursday. Initial U.S. jobless
claims totaled just over 1 million for the week ending Aug. 22…” Story at…
GDP-2ND EST (Marketwatch)
“The historic plunge in gross domestic product in the
second quarter was revised down slightly to show a 31.7% annual decline,
underscoring the devastation to the economy spawned by the coronavirus
pandemic.” Story at…
ALL IS NOT WELL (Heritage Capital, commentary excerpt)
“…one of my favorite canaries in the coal mine below,
[is] the New York Stock Exchange Advance/Decline Line which measures
participation…something definitely changed a few weeks ago. The S&P 500 in
the upper chart has been rallying as you know. The problem is that the NYSE A/D
Line below it has been going down. Something ain’t right and all is not well my
friends…
…conditions like this can persist. The difference maker
this time around is the Fed. Never before in history has a Fed created such a
tsunami of liquidity in our financial system so quickly and so widespread.
Obviously, we can’t ignore this nor underestimate the power of the Fed when
they decide to go all in. If history is still a valid guide, we know that this
won’t end well, but the timing is going to be more difficult than ever although
timing is always the hardest part.” – Paul
Schatz, President Heritage Capital.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:05 Thursday. 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
-Thursday the S&P 500 rose about 0.2% to 3485,
another all-time high.
-VIX rose about 5% to 24.47. (The Options Boys are worried; VIX was UP
today (again) along with the Index. That doesn’t happen often.)
-The yield on the 10-year Treasury rose to 0.755%.
I am tired of repeating bearish indicators. There are many, as I have listed in recent
blogs. Not much has changed, though we did add another warning sign today.
There have only been 4 down-days in the last 2 weeks. That
is a rare, bearish, sell-signal. The last time it we saw 4-down-days in a month,
the S&P 500 dropped 7%. Looking back to 2017, however, there were some bunched
signals then that did not result in a drop, so this indicator isn’t infallible (none
are).
The most compelling bear signal is that the S&P 500
is 13.1% above its 200-dMA. Values in the 10-15% range are sell-signal. As the
market stretches higher, a bigger fall becomes more likely.
The daily sum of 20 Indicators improved from +2 to +6 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +2 to +5. (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 have been surprised at how long the markets have been
able to advance, especially in the last week or so. One wonders can the FED prevent a
correction? The answer is, “not forever”, but perhaps they’ll be able to hold
it off longer than I expected.
I remain bearish in the short and intermediate term. I
have a very small Short-position.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to 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 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.
