“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
FOMC RATE DECISION (Yahoo Finance)
“The Federal Reserve on Wednesday kept rates steady at
near-zero, suggesting that interest rates will likely stay there through the
end of 2023…Updated forecasts have the Fed now seeing 3.7% contraction in GDP
with the unemployment rate reaching 7.6% by the end of the year.” Story at…
RETAIL SALES (MarketWatch)
“Sales at retail stores across the country rose in August
for the third month in a row in another display of the economy’s resilience,
but the momentum appears to be waning after a big burst of demand earlier in
the summer once the U.S. reopened for business in the wake of the coronavirus
crisis.” Story at…
EIA CRUDE INVENTORIES (energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 4.4 million barrels from the
previous week. At 496.0 million barrels, U.S. crude oil inventories are about
14% above the five year average for this time of year.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 6:45 Wednesday. 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. There is
a worrisome trend in the numbers: they have flattened out and do not appear to
be trending down at present.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 0.5% to 3385.
-VIX rose about 2% to 26.04.
-The yield on the 10-year Treasury rose to 0.698%.
I covered my short for a loss so naturally the market
dropped late in the day. Price-action looked bad with a late-day,
sell-off. Market Internals were much
more optimistic: Advancing stocks outpaced declining stocks by 60%; advancing
volume was more than double declining volume; and new-highs outpaced new lows
89 to 7. MACD of Breadth turned bullish today. Even so, it is still hard to get
too enthusiastic.
At today’s close, the S&P 500 was 9.2% above its
200-dMA. Values in the 10-15% range are sell-signal, but when sentiment is
considered, this indicator is bearish now. The markets may not be able to get
too much higher before we see more trouble.
In Jan of 2010 the market was stretched to 15.9%, as it
was at the top recently. In 2010, it preceded a quick, 3-week, 8%-correction. This
was followed by a more protracted 16%-correction lasting from mid-April to
early July 2010. We just had a 3-DAY, 7% correction. Even if it is over in
the short term (it might be, since the S&P 500 did not break its 50-dMA on
3 tries), I suspect we’ll see more downside as the Index struggles to make new
highs.
The daily sum of 20 Indicators slipped from +3 to -1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from -35 to -38. (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.
The Long Term NTSM indicator ensemble remained SELL.
Volume and Price and the Panic Indicator are bearish. It has been SELL for the
last 7 days.
The 5-10-20 Timer System remains negative because both
the 5-dEMA and the 10-dEMA are below the 20-dEMA.
When my long-term system signals Sell, it is usually
correct, so I am bearish. As always, the FED is the wild-card. Is the market
playing under new rules? Maybe, but in the past, the FED can’t hold up markets
if sentiment switches to fear.
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
switched 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.
