Thursday, December 31, 2020

Jobless Claims … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“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.

 

JOBLESS CLAIMS (Reuters)

“Fewer Americans sought unemployment benefits last week, but the modest drop did little to dispel concerns that the U.S. job market and wider economy face an arduous recovery from the devastation inflicted by the coronavirus pandemic in 2020...While new claims for benefits reported by the U.S. Labor Department on Thursday dropped for the second week in a row to a seasonally adjusted 787,000 in the week ended Dec. 26 from 806,000 a week before, it left them at roughly the level they were three months ago and with little indication they would show material improvement any time soon.” Story at...

https://www.reuters.com/article/us-usa-economy/us-jobless-claims-dip-but-show-recovery-has-long-way-to-go-idUSKBN29518I

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 9:00pm Thursday. 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

-Thursday the S&P 500 rose about 0.6% to 3756, all after 2pm. (New all-time high.)

-VIX slipped about 0.1% to 22.75.

-The yield on the 10-year Treasury slipped to 0.919%.

 

Bollinger Bands were overbought today, but not RSI.  We’re closer to a top, but perhaps not there yet. I do expect the markets to retreat in the next week or two, but we’ll see. Indicators don’t support that opinion yet, but they’re getting closer.

 

The daily sum of 20 Indicators remained +3 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +14 to 12. (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 16.1% 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

 

THURSDAY 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.