“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
MORE STIMULUS AND THE 2ND DERIVATIVE EFFECT (Real
Investtment Advice)
“If we run a hypothetical model of Government expenditures
at $50 billion per quarter, you can see the issue of the “second derivative.”
In this case, even though Federal expenditures are increasing at $50 Billion
per quarter, the rate of change declines as the total spending
increase....Since 1980, the overall increase in debt has surged to levels that
currently usurp the entirety of economic growth. With economic growth rates
now at the lowest levels on record, the change in debt continues to divert more
tax dollars away from productive investments into the service of debt and
social welfare. Another way to view the impact of debt on the
economy is to look at what “debt-free” economic growth would be. In
other words, without debt, there has actually been no organic economic
growth... At some point, you have to realize that you can’t get out of a “debt
hole” by piling on more debt. Eventually, you have to stop digging.” Commentary at...
https://realinvestmentadvice.com/macroview-more-stimulus-and-the-2nd-derivative-effect/
STOCK MARKET CRASH (Marketwatch)
“Within 18 months, it’s [the stock market] going to crack pretty hard. I
think that you want to be avoiding it for the time being. When the next big
meltdown happens, I think the U.S. is going to be the worst performing market,
actually, and that’ll have a lot to do with the dollar weakening.” - Jeffrey
Gundlach, DoubleLine Capital, “The Bond King.” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
5:30pm Monday. 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.
CHRIS CHRISTIE RELEASED FROM HOSPITAL (CNBC)
“Doctors gave Christie the anti-viral drug remdesivir, according to
CNN, the same treatment that President Donald Trump was provided
when hospitalized with Covid-19 at the Walter Reed National Military Medical
Center.” Story at...
My cmt: Trump got a new Anti-body drug from Regeneron. I
don’t know if Trump got remdesivir. Remdesivir, invented by Gilead Sciences,
Inc, was given to patient #1 in Seattle. It has been around a while. I think it was developed as an Ebola
treatment.
FIRST US CORONAVIRUS CASE (New England Journal of
Medicine)
“On January 19, 2020, a 35-year-old man presented to an
urgent care clinic in Snohomish County, Washington, with a 4-day history of
cough and subjective fever…He disclosed that he had returned to Washington State
on January 15 after traveling to visit family in Wuhan, China….On January 20,
2020, the CDC confirmed that the patient’s nasopharyngeal and oropharyngeal
swabs tested positive for 2019-nCoV by real-time
reverse-transcriptase–polymerase-chain-reaction (rRT-PCR) assay… Treatment with
intravenous remdesivir (a novel nucleotide analogue prodrug in development10,11)
was initiated on the evening of day 7, and no adverse events were observed in
association with the infusion… As of January 30, 2020, the patient remains
hospitalized…all symptoms have resolved with the exception of his cough, which
is decreasing in severity.” Report at…
https://www.nejm.org/doi/full/10.1056/NEJMoa2001191
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.6% to 3534.
-VIX rose about 0.3% to 25.07.
-The yield on the 10-year Treasury was unchanged at
0.777%.
The S&P 500 is 13.3% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is also bearish. The Index
was 21% above its 200-dMA in October of 2009. So, it is possible for this
indicator to get stretched much farther, that is, if you believe that we have
seen a major bottom like the bottom after the March 2009, Housing-crash. I
don’t like the comparison. At the 2 September 2020 top, the Index was 15.9%
above its 200-dMA. That looks like a
more reasonable comparison to current conditions and we can look at Sentiment
for further clues.
In 2009, we had seen a long bear market with extreme
bearish sentiment. In 2009, my sentiment
numbers bottomed at 24%-Bulls near the housing-crash bottom. At the 23 March
2020 Covid-bottom, sentiment was 55%-Bulls – too high. Last, PEs seems too high
for the market to ignore its over-stretched condition.
Bollinger Bands turned bearish (overbought) today, but we
don’t see enough other Topping Indicators giving a warning, so it looks like the
markets could get higher.
The daily sum of 20 Indicators slipped from +12 to +10 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +35 to +47. (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 12 days after a SELL before that. The Volume indicator is positive;
Sentiment, VIX and Price Indicators are neutral.
I remain bearish in the longer term, but this rally may
have farther to go, but not much farther.
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.
For more details, see NTSM Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
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, 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.
