“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
PAYROLL REPORT / AVG HOURLY EARNINGS (CNBC)
“Nonfarm payrolls rose by a lower than expected 661,000
in September and the unemployment rate was 7.9%, the Labor Department said
Friday in the final jobs report before the November election... Average hourly
earnings were little changed over the month but still about 4.6% higher than a
year ago. However, hourly comparisons are difficult in the current environment
considering the virus impact and the continued tendency of higher-wage workers
returning to their jobs before those on the lower end.” Story at...
https://www.cnbc.com/2020/10/02/jobs-report-september-2020.html
FACTORY ORDERS (MarketWatch)
“Factory orders rose for the fourth straight month in
August, the Commerce Department said Friday. Orders for manufactured goods rose
0.7% after a 6.5% gain in the prior month.” Story at...
UNIV MICHIGAN SENTIMENT (Reuters)
“The University of Michigan’s consumer sentiment index
rose to 78.9 in the first half of this month from a final reading of 74.1 in August.
The index remains 22.1 points below February’s level.” Story at...
PRESIDENTIAL CYCLE PATTERN CALLS FOR CHOPPY OCTOBER
(McClellan Financial Publications)
ELECTION YEAR... (Heritage Capital)
“...my top scenario still calls for one more decline into
the second or third week of the month for the final low. We will see how it all
shakes out shortly. If my scenario is to be correct, the stock market should be
peaking over the coming few days.” Paul Schatz, President Heritage Capital.
https://investfortomorrow.com/blog/election-year-octobers-dont-believe-what-you-hear/
SHADES OF 1999 TODAY (MarketWatch)
“A year ago, I said the U.S. stock market was “partying
like it’s 1999.” I was off by a year. Last year was missing the necessary
euphoric speculation, which ironically arrived in the middle of a worldwide
pandemic. Just as history doesn’t repeat itself but rhymes, so does U.S. stock
market behavior. Though there are a lot of similarities between 1999 and
2020...” - Vitaliy Katsenelson, Chief Investment Officer, Investment Management Associates. Commentary at...
My cmt: ...and we remember that Year 2000 was the start
of the Dot.com crash after markets peaked early in the year. That led to a 57%
sell-off on the S&P 500. I think this is a very possible scenario for 2021.
Two things that would do it: (1) An end to this correction after a 10-20% drop
(2) a failed attempt to reclaim all-time highs that gets back to the 3350
region. That would set up a massive head and shoulders pattern. It would also
create the VIX pattern that was forewarned by Sven Henrich’s Commentary in the NTSM blog
titled, “$VIX46” at...
http://navigatethestockmarket.blogspot.com/2020/08/retail-sales-industrial-production.html
That scenario is possible, but very far from certain.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 10:00 Friday. US total case 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.
-Friday the S&P 500 fell about 1% to 3348.
-VIX rose about 3% to 27.63.
-The yield on the 10-year Treasury rose to 0.700%.
Here’s the Friday run-down of some important indicators.
These tend to be both long-term and short-term so they are somewhat different
than the 20 that I report on daily.
BULL SIGNS
-The 50-dMA and the
100-dMA of the % of stocks advancing on the NYSE (Breadth) are above 50%.
-The 10-dMA of stocks
advancing on the NYSE (Breadth) popped above 50% Friday.
-MACD of stocks advancing on the NYSE (breadth) made a
bullish crossover 1 Oct.
-The smoothed advancing volume on the NYSE is moving up.
-McClellan Oscillator is above zero.
NEUTRAL
-Statistically, the S&P 500 gave a panic-signal, 3
September. A panic signal usually suggests more to come. (This signal remains in effect for 7-trading
days.)
-Overbought/Oversold Index, a measure of advance-decline
data is neutral.
-Non-crash Sentiment indicator remains neutral.
-The Fosback High-Low Logic Index is neutral.
-There have been 10 up-days over the last 20 days.
Neutral
-We’ve seen 6 up-days over the last 10-days. Neutral
-Bollinger Bands – still neutral.
-RSI is now neutral.
-Breadth on the NYSE vs the S&P 500 index is neutral.
-The S&P 500 is 7.6% above its 200-dMA. When
Sentiment is considered, the signal is also neutral.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to give a signal.
-My Money Trend indicator; the
signal is not strong
-50% of the 15-ETFs that I track have been up over the
last 10-days – neutral.
BEAR SIGNS
-VIX gave a sell-signal Friday.
-The Smart Money (late-day action) is headed down. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-The 5-10-20 Timer System is a sell; the 5-dEMA and the
10-dEMA are below the 20-dEMA.
-MACD of S&P 500 price made a bearish crossover 4
September.
-Long-term new-high/new-low data.
-Short-term new-high/new-low data.
-Only 2.3% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made new all-time-highs. (This stays in the
negative column until we make a new high.)
-Cyclical Industrials (XLI-ETF) are now under-performing
the S&P 500. This is a big change.
-The S&P 500 is under-performing the Utilities ETF
(XLU) as of Friday
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 9
bear-signs and 5 bull-signs. Last week, there were 10 bear-signs and 3 bull-signs.
Bear/Bull signs improved this week, number wise, but the
bear signs look significantly worse this week. Some of the Bear signs this week
are strong ones. VIX, XLU and XLI are all warning signs by the Pros. A bad down
day Monday could wipe out 4 of the Bull signs. We’ll see.
As of today, the S&P 500 is down 6.5% from its
all-time high. This is day 21 of the correction. The average time from top to
bottom for a correction is 35-days for corrections less than 10% and 68-days
for bigger corrections. The 200-dMA is now 3112, 7.6% below today’s close.
The daily sum of 20 Indicators declined from +1 to zero
(a positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from -20 to -19. (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 has been HOLD for
the last 6 days after a SELL before that. The Sentiment, Volume and Price Indicators
are neutral. VIX was negative. That’s confirms
my negative lean; VIX is one of my more reliable indicators, but we do need to see
more than one sell-indicator to give us a sell overall. It’s not important at
this point since we got the 1st Sell signal 3-days after the 2 Sept top.
I remain bearish.
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…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
FRIDAY 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.
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 conservative position that I re-evaluate daily,
but it is appropriate for the correction.
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%; if this correction is deep enough, 80% would not
be out of the question.
