“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.
ADP EMPLOYMENT CHANGE (ADP Research)
“Private-sector employment decreased by 123,000 from
November to December, on a seasonally adjusted basis.”
Report at...
https://adpemploymentreport.com/2020/December/NER/NER-December-2020.aspx
FACTORY ORDERS (MarketWatch)
“U.S. factory goods orders rose for the seventh straight
month in November, the Commerce Department said Wednesday. Orders for
manufactured goods rose 1% after a 1.3% gain in the prior month. Factories have
been able to adapt their operations to meet health precautions required by the
coronavirus pandemic.” Story at...
https://www.marketwatch.com/story/factory-orders-jump-a-solid-1-in-november-11609946435
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 8.0 million barrels from the
previous week. At 485.5 million barrels, U.S. crude oil inventories are about
9% above the five year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
WAITING FOR THE LAST DANCE – EXCERPT (GMO)
“The long, long bull market since 2009 has finally
matured into a fully-fledged epic bubble. Featuring extreme overvaluation,
explosive price increases, frenzied issuance, and hysterically speculative
investor behavior, I believe this event will be recorded as one of the great
bubbles of financial history, right along with the South Sea bubble, 1929, and
2000... But this bubble will burst in due time, no matter how hard the Fed
tries to support it, with consequent damaging effects on the economy and on
portfolios. Make no mistake – for the majority of investors today, this could
very well be the most important event of your investing lives.” - Jeremy
Grantham, Chief investment strategist of Grantham, Mayo, & van Otterloo
(GMO), a Boston-based asset
management firm
https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/
My cmt: I should be able to avoid most of the coming
crisis as the indicators deteriorate. Calling an exact top is mostly luck, but
it should be possible to warn as the decline starts. When? Well at this point,
it would be a wild guess, but 2021 seems like a better than 50% chance.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:15pm 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 0.6% to 3748.
-VIX slipped about 1% to 25.07.
-The yield on the 10-year
Treasury rose to 1.039%.
I thought we might get a clear top-signal today, but RSI was
never overbought and then the news of rioting in DC put an end to the rally.
Because Trump continued to lie about a stolen election
without any evidence, I made this comment about Trump on 21 December October: “After the
election, a friend said that he voted for Biden because he thought Trump was
dangerous. I laughed it off. I was
wrong. I will never vote for, or in any way support that son-of-a-bitch again.”
Today proved that my friend was more correct than I ever could have guessed.
The daily sum of 20 Indicators improved from -7 to +1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from -2 to +1. (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 HOLD. Now, Price VIX, Sentiment & Volume are neutral.
The market remains overbought
with the S&P 500 15.1% 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.
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 improved to 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.
