“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
Captain Kirk: "Bones, when will this covid19 be
over?" Doctor McCoy: "Dammit Jim, I'm a doctor not a politician"
FED BEIGE BOOK (MarketWatch)
“The U.S. economy expanded in August, but many parts of
the country experienced slower growth amid lingering anxiety over the
coronavirus, according to the Federal Reserve’s latest “Beige Book” findings. ‘Continued
uncertainty and volatility related to the pandemic, and its negative effect on
consumer and business activity, was a theme echoed across the country,” the
central bank’s so-called Beige Book reported.’” Story at…
AUTO SALES (Car and Driver)
“As the months go on since the beginning of the coronavirus
pandemic, auto sales have recovered more and more—but headwinds
still persist, keeping sales down compared to last year.” Story at…
ADP EMPLOYMENT (CNBC)
“Private payroll growth came in well below expectations
for August, according to a report Wednesday from ADP, whose job tallies have
differed widely from the government’s during the coronavirus pandemic. Companies
added 428,000 jobs during the month…” Story at…
FACTORY ORDERS (Nasdaq.com)
“New orders for U.S. manufactured goods showed another
substantial increase in the month of July, according to a report released by
the Commerce Department on Wednesday.
The Commerce Department said factory orders soared by 6.4
percent in July…” Story at…
EIA CRUDE INVENTORIES (Energy Information System)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 9.4 million barrels from the
previous week. At 498.4 million barrels, U.S. crude oil inventories are about
14% above the five year average for this time of year.” Press release at…
PROS GETTING READY FOR A CRASH (MarketWatch)
“The seemingly endless rally… gives the impression that
prices are endorsed and supported by the entire professional investment community,”
he said. “After all, despite the vocal concerns over valuations having split
away from underlying corporate and economic fundamentals, few fund managers
have been willing to challenge the market by placing outright shorts.” However,
“sophisticated investors” are expressing their cautious views with the use of
derivatives, and El-Erian says the mom-and-pop types should take note.” Story
at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:55 Monday. 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
-Wednesday the S&P 500 slipped about 1.5% to 3581.
-VIX rose about 2% to 26.57.
-The yield on the 10-year Treasury slipped to 0.647%.
At today’s close, the S&P 500 was 15.9% above its
200-dMA. Values in the 10-15% range are sell-signal. We’re in rarified air now.
I had to go back to Jan of 2010 to find a time when the market was this stretched.
It preceded a quick, 3-week, 8%-correction, but only after a month where the
Index was essentially stalled. This was followed by a more protracted 16%-correction
lasting from mid-April to early July 2010.
I’ll say it again, it is not normal for the S&P 500
to trade 16% above its 200-dMA.
Today was another statistically-significant, up-day. That
just means that the price-volume move exceeded my statistical parameters.
Analysis shows 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. Is this a top? Sure
looks like it, but I’ve thought that recently…and been wrong.
Bollinger Bands were overbought again today. RSI remained overbought and jumped up to 91 (14-day,
SMA).
Signals are suggesting a possible Top with even more
urgency today than we’ve seen recently. There were 6 top-indicators warning of
a stretched market and possible top.
Still, the trend following indicators are showing the
trend is up, at least today. Today, the % of stocks advancing in the last 2
weeks bounced up to 52%, i.e., on average, most stocks on the NYSE have
advanced over the last 10-days.
The daily sum of 20 Indicators improved from +2 to +7 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +6 to +16. (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 not as bearish as one might expect. In fact,
they look bullish now!
The S&P 500 rose 1.5% today. Ok, but the VIX also
rose, nearly 2% - irrational. VIX is now above 26 and the S&P 500 made another
new high? That’s insane, with a different capital “I” than yesterday.
I remain bearish in the short and intermediate term. I closed
my small Short-position early this morning. This books a tax loss. I had
planned to short the Russell later in the day, but we had a guest and I couldn’t
slip away. I’ll short it tomorrow, still with a small position - more for fun
than profit.
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)
Here’s the revised DOW 30 and its momentum analysis. The
top ranked stock receives 100%. The rest are then ranked based on their
momentum relative to the leading stock.
WEDNESDAY 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 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.
