“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"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
PAYROLL REPORT / UNEMPLOYMENT (CNBC)
“…payroll growth slowed in July but was still better than
Wall Street estimates even as a rise in coronavirus cases put a damper on the
struggling U.S. economy. Nonfarm payrolls increased 1.763 million for the
month… The total unemployment level is at 16.3 million Americans, a decline of
more than 1.4 million… “The numbers may be good relative to expectations, but
you’re still looking at an unemployment rate over 10% and labor force
participation slipping a little bit” to 61.4%, said Kathy Jones, head of fixed
income at Charles Schwab. “It’s still a pretty weak economy.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website.
The US reported about 51,000 new cases today as of 5:10 PM Friday. It does
appear that the new-case numbers have gone down this week and that is reflected
in a slight flattening of the curve. Whether it is real remains to be seen.
Virginia had a data glitch that delayed the Commonwealth’s numbers today. Let’s
hope that is not a problem with other States as well.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.1% to 3351.
-VIX dipped about 2% to 22.21.
(The falling VIX is giving a buy signal.)
-The yield on the 10-year Treasury rose to 0.568%.
The S&P 500 is still 9.6% above its 200-dMA. Values
in the 10-15% range are sell-signal. While this could be 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 daily sum of 20 Indicators improved from +5 to
+13 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from -14 to +3. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
One would think the high bullish numbers would be good. Oddly,
when I looked at past data, a value of +13 bullish, daily-indicators often
indicated a top that presaged mostly small pullbacks in the 3-5% range.
I am tempted to Buy-the-Dip (when it gets here) based on
positive indicators; but with more than 16-million people out of work, one
wonders whether the S&P 500 is fairly priced based on what is still a very
weak economy. The market appears to be overvalued. One of the major brokerages downgraded
Apple based on valuation and it is a major leader of this advance.
Looks like some sort of pullback is getting closer. Big
or small? I don’t know.
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.
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 improved
to BULLISH 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.
