"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
JOBLESS CLAIMS (Reuters)
“The number of Americans filing a new claim for unemployment
benefits rose unexpectedly back above the 1 million mark last week, a setback
for a struggling U.S. job market crippled by the coronavirus pandemic.” Story
at…
PHILADELPHIA FED INDEX (MarketWatch)
“The Philadelphia Federal Reserve’s manufacturing index
fell 7 points to a seasonally adjusted reading of 17.2 in August, the regional bank said Thursday. This is the second
straight decline in the index after it his 27.5 in June.” Story at…
LEADING ECONOMIC INDICATORS (Conference Board via PRnewswire)
"The US LEI increased for the third consecutive
month in July, albeit at a slower pace than the sharp increases in the previous
two months," said Ataman Ozyildirim, Senior Director of Economic Research
at The Conference Board. "Despite the recent gains in the LEI, which
remain fairly broad-based, the initial post-pandemic recovery appears to be
losing steam. The LEI suggests that the pace of economic growth will weaken
substantially during the final months of 2020." Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:15 Thursday. 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
-Thursday the S&P 500 rose about 0.3% 3386.
-VIX rose about 1% to 22.72.
-The yield on the 10-year Treasury slipped to 0.652%.
I took some profits recently. See “Current Market
Position” below for details.
Today was a strange day. The Index was up, but market
internals were down. All of the ETFs I track were down, except for technology
(XLK) and the S&P 500, of course. That’s generally bearish because it is
more evidence of the narrow advance.
As I previously noted, the S&P 500 made a new high Tuesday
while only 3.3% 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. 3.3% is
not a bear sign, since my sell-signal is a value less than 3%, but it was close.
If we look back, we note that the last time we saw a value less than 3%
(followed by a down day) was in Sept 2018 when the value was 2.9%. That top preceded a 20% correction. Since Tuesday’s
value was close, but not below 3%, we’re left wondering whether we have a bear
signal or not. This signal is rarely activated and even values as low as 3.3%
at tops are very rare. There were other bear signs even if this one is in doubt...
MACD of S&P 500 Price had a bearish crossover
today. MACD of NYSE Breadth continues to
deteriorate.
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 +54 +48. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
Based on chart patterns and some of the bearish
indicators it seems like we may have made a top. 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. I could be wrong; I have never seen the talking heads have such
divergent opinions. Jeff Saut says we’re in the early stages of a bull market
while others suspect a crash is just around the corner. Still, weakness into
the election seems likely.
I am concerned about Ataman Ozyildirim’s comment today (Senior
Director of Economic Research at The Conference Board); "Despite the
recent gains in the LEI, which remain fairly broad-based, the initial
post-pandemic recovery appears to be losing steam. The LEI suggests that the
pace of economic growth will weaken substantially during the final months of
2020." Then there’s the recent FOMC minutes that stated, “…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,”
Those comments don’t look like a recipe for a new bull
market.
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.
I took profits in Microsoft last week and the XLI-ETF
today. 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.
