“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
“Bubbles tend to topple under their own weight. Everybody
is in. The last short has covered. The last buyer has bought (or bought massive
amounts of weekly calls). The decline starts and the psychology shifts from
greed to complacency to worry to panic. Our working hypothesis, which might be
disproven, is that September 2, 2020 was the top and the bubble has already
popped.” - David Einhorn, Greenlight hedge fund.
My cmt: The 2 Sept high was 3581, so it looks like
David einhorn was too early.
CHICAGO PMI (ISM-Chicago)
“Chicago Business Barometer™ Rose to 59.5 in December The
Chicago Business BarometerTM, produced with MNI, edged up to 59.5 in
December. Through Q4 as a whole, business sentiment recovered further to
59.6, the strongest reading since Q4 2018. Among the main five indicators,
Employment saw the largest monthly gain, followed by Order Backlogs. New Orders
recorded the biggest decline.” Press release avaiable at...
https://www.ism-chicago.org/insidepages/reportsonbusiness/
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 6.1 million barrels from the
previous week. At 493.5 million barrels, U.S. crude oil inventories are about
11% above the five year average for this time of year. “Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:15pm Wednesday. 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.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose
about 0.1% to 3732.
-VIX slipped about 0.4% to 22.98.
-The yield on the 10-year
Treasury slipped to 0.926%.
One measure of new-highs has reached levels not seen
since the top in April 2010, right at the start of a 16% correction. It doesn’t
mean we are headed toward a big correction, but it is another measure that
shows the market is very stretched. Still, I haven’t seen many top indicators
yet. I think the top-signal will be when both Bollinger Bands and RSI are
negative. That may occur after the holidays.
The daily sum of 20 Indicators declined from +3 to +1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +12 to 11. (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 BUY. Now, Price & VIX are bullish; Sentiment & Volume
are neutral. Since I think the market is near a top; I will wait before adding
to stock holdings.
The market remains overbought
with the S&P 500 15.6% above its 200-dMA. If past history follows, that
tends to cap the gains going forward and suggest that the downside risk is
greater than the upside risk.
I’ll continue to keep a low %
of funds in the stock market until I see a better buying point. We may see a Holiday
rally until the new year.
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
WEDNESDAY 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 very conservative position
that I re-evaluate daily.
The markets have not
retested the lows on recent corrections and that has left me under-invested on
the bounces. I will need to put less reliance on retests in the future.
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 a correction is deep
enough, 80% would not be out of the question.
