“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.
PAYROLL REPORT / UNEMPLOYMENT RATE (NBC news)
“The U.S. economy added 245,000 jobs in November, as the
unemployment rate fell to 6.7 percent, according to data released Friday by the
Bureau of Labor Statistics. Economists had predicted the economy would gain
around 440,000 jobs.” Story at...
https://www.nbcnews.com/business/economy/u-s-economy-gains-just-245-000-jobs-final-report-n1249983
FACTORY ORDERS (Reuters)
“New orders for U.S.-made goods increased more than
expected in October and business investment on capital was a bit stronger than
initially thought as the manufacturing sector continues its steady recovery
from the pandemic. The Commerce Department said on Friday that factory orders
rose 1.0% after increasing 1.3% in October.” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:45 pm 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.
Looks like a new record for new cases!
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose
about 0.9% to 3699.
-VIX slipped about 3% to 20.73.
-The yield on the 10-year
Treasury rose to 0.970%.
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
-11 Nov., we got a “Breadth Thrust” indication. That’s a
rare, very bullish sign.
-9 Nov. (Vaccine Announcement Day), the 52-week,
New-high/new-low ratio improved by 5.8 standard deviations – very bullish and
also rare.
-The 10-dMA of stocks advancing on the NYSE
(Breadth) is above 50%
-The 50-dMA % of stocks advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA of the % of stocks advancing on the
NYSE (Breadth) is above 50%.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-The 5-10-20 Timer System is BUY; the 5-dEMA and the
10-dEMA are above the 20-dEMA.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bullish crossover 4 Nov.
-MACD of S&P 500 price made a bullish crossover 5
November.
-McClellan Oscillator is above zero.
-The Fosback High-Low Logic Index is bullish.
-Slope of the 40-dMA of New-highs is rising.
-VIX is falling fast enough to give a Bull-signal.
-The smoothed advancing volume on the NYSE is rising.
-The S&P 500 is outperforming Utilities ETF (XLU).
-63% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Non-crash Sentiment indicator remains neutral, but it is
very elevated and leaning bearish.
-Statistically, the S&P 500 gave a panic-signal, 28
October. This usually means more downside to come, but the bear signal has
expired.
-There have been 11 up-days over the last 20 days.
Neutral
-We’ve seen 6 up-days over the last 10-days. Neutral
-The market has broadened out; 9.1% and 8.9% of all
issues traded on the NYSE made new, 52-week highs when the S&P 500 made a
new all-time-high on 24 November and 27 November respectively. The average over
the last 5 years has been about 7%.
-Long-term new-high/new-low data. (It looks like it
is rolling over; let’s say neutral.)
-Short-term new-high/new-low data. (It looks like it
is rolling over; let’s say neutral.)
-Bollinger Bands. This indicator is extremely close to
overbought, but not there yet. RSI is still neutral, so I’ll keep this in the
Neutral column. I like to work Bollinger Bands and RSI together.
-RSI.
BEAR SIGNS
-Breadth on the NYSE compared to the S&P 500 index is
warning of a correction at any time. I’ve been following this for 9 years. It
has only been this stretched once - 4 days before an 8% correction in Feb 2011.
-My Money Trend indicator is trending down.
-The S&P 500 is 17.1% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is also bearish.
-Overbought/Oversold Index (Advance/Decline Ratio) is
overbought.
-Cyclical Industrials (XLI-ETF) are underperforming the
S&P 500.
-The Smart Money (late-day action) is bearish. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
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 6
bear-signs and 16 bull-signs. Last week, there were 5 bear-signs and 17
bull-signs.
The daily sum of 20 Indicators remained +8 (a positive
number is bullish; negatives are bearish). The 10-day smoothed sum that smooths
the daily fluctuations increased from +58 to +60. (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 switched back up to BUY, 24 Nov. Now, Price, Volume & VIX are
bullish; Sentiment is neutral. The Indicator remains BUY, but I think we are
near a top so I am waiting.
The market remains extremely
overbought with the S&P 500 17.1% above its 200-dMA. If past history
follows, that tends to cap the gains going forward. The downside risk is greater
than the upside risk.
Today could have been a top,
but probably not. The top will be signaled by a big move up. It looks like a 1%
move higher would trip both Bollinger Bands and RSI to the bear side. If we see that Monday, it would be a good day
to short.
I’ll continue to keep a low %
of funds in the stock market until I see a better buying point.
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
FRIDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained POSITIVE 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.
