"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
PPI (Marketwath)
“The wholesale cost of U.S. goods and services posted the
biggest increase in July in nearly two years, led by higher oil prices, but
inflationary pressures in the economy were still largely invisible owing to the
coronavirus pandemic. The producer price index shot up 0.6% last month…Another
measure of wholesale costs known as core PPI — which excludes food, energy and
trade margins — rose 0.3% last month to mark the third straight gain.” Story
at…
SMALL BUSINESS OPTIMISM (ABLadvisor)
“NFIB’s Small Business Optimism Index fell 1.8 points to
98.8 in July, near the survey’s historical average. Overall, 4 of the 10 Index
components improved, 5 declined, and 1 was unchanged. The NFIB Uncertainty
Index increased 7 points to 88. Reports of expected better business conditions
in the next six months declined 14 points to a net 25 percent. Owners continue
to temper their expectations of future economic conditions as the COVID-19
public health crisis is expected to continue.” Story at…
BUBBLE IN BIG TECH (CNBC)
“BTIG’s Julian Emanuel is telling clients to consider
trimming their exposure to big tech stocks. ‘Where the risk is disproportionate
is in technology,’ the firm’s chief equity and derivatives strategist told
CNBC’s “Trading Nation” on Monday.
‘That’s where our concerns start to bubble up.’ According to Emanuel, Facebook, Apple, Amazon, Microsoft and Google are the most
vulnerable.” Story at…
WAITING FOR THE CRASH (Seeking Alpha)
“Even though there are some shimmers on the horizon, in
my view, stock markets are still strongly decoupled from the real economy and
that the so-called smart money sees it that way as well. Feelings, however, are
the utterly wrong guide in investing. In the long term and statistically,
equities are still the asset classes with the highest returns. I am continuing
to invest accordingly.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:00 Tuesday. I’ve plotted the daily numbers on the right side of the graph
with a 10-dMA of daily numbers in Green. Looks like we’ve peaked. Fauci said
the US was the worst in the world for COVID19.
To check, I went thru a number of countries and calculated per capita COVID19
numbers. Turns out he was correct, although we are about the same as Brazil.
Our numbers are 3.5 times larger than Italy.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dropped about 0.8% to 3340.
-VIX rose about 9% to 24.03.
-The yield on the 10-year Treasury rose to 0.644%.
We’ve still only seen 2 down-days in the last 2 weeks of
trading. That’s a bearish sign, and if
Wednesday is an up-day, it would send a stronger bear-signal. The last time we
had 9 out of 10 trading days up was in April of 2019. That was about a week before
a 7% drop in the S&P 500.
The S&P 500 is 8.9% 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. We also note that the Overbought/Oversold Index is overbought,
although this indicator is not used all that much these days.
A short-term top is likely to be signaled by a big
one-day move up (>1%). At this point, it looks like a small correction is
the most likely scenario. Long term indicators still look Ok. For that matter,
most of the short-term indicators are still bullish.
The daily sum of 20 Indicators slipped from +12 to
+11 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from +18 to +30. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I am tempted to Buy-the-Dip (when it gets here); 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. We’ll see.
Looks like some sort of pullback is getting closer. Big
or small? I don’t know, but long-term indicators still look good so we might
guess “small”.
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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.
