“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
"The extent to which the president, President Trump,
for months leading up to January 6 spread the notion that the election had been
stolen or that the election was rigged was a lie and people need to understand
that. We need to make sure that we as Republicans are the party of truth that
we are being honest about what really did happen in 2020..." - Liz
Cheney, US Republican Representative, Wyoming.
“January 6 is going to leave a scar. For 220 years one of
the most beautiful things about America has been a peaceful transfer of power.
But what we saw three weeks ago was ugly, shameful mob violence to disrupt a
Constitutionally-mandated meeting of Congress to affirm that peaceful transfer
of power...It happened because the president lied to you. He lied about the
election results for 60 days. Despite losing 60 straight court challenges, many
of them handed down by Trump-appointed judges...He lied by saying the vice
president could violate his constitutional oath and declare a new winner. That
wasn't true.” - Ben Sasse, US Republican Senator, Nebraska.
This country was founded by the bayonet; it survives by
the ballot. All who falsely disparage
the honesty of our elections are striking a blow at the foundations of our
nation and should be charged with sedition. – Meade Stith
CONSUMER PRICE INDEX (CNBC)
“U.S. consumer prices rose moderately in January and
underlying inflation remained benign as the pandemic continues to be a drag on
the labor market and services industry.
The Labor Department said on Wednesday its consumer price
index increased 0.3% last month after climbing 0.4% in December.” Story at...
https://www.cnbc.com/2021/02/10/consumer-price-index-cpi-january-2021.html
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 6.6 million barrels from the
previous week. At 469.0 million barrels, U.S. crude oil inventories are about
2% above the five-year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
“THIS IS THE WILDEST MARKET I HAVE EVER SEEN” –
DRUCKENMILLER (ZeroHedge)
“The recession we had was 5x the average since WWII but
it occurred in 25% of the time,” Druckenmiller said adding that “more bizarrely
in a year when 11 million more people were unemployed, we had the largest
increase in personal income in 20yrs during an economic downturn, due to
massive policy support. The CARES Act added trillions in fiscal stimulus. How big
was it? In three months in 2020 we increased the deficit more than the past 5
recessions combined (1973, 1975, 1982, the early 90s', the
dot com bust and the GFC). The Fed in 6 weeks bought more treasuries than in
10yrs under Bernanke/Yellen. Corporate borrowing, which
almost always goes down in a recession, which had already increased from $6trln
to $10trln going into the crisis due to the Fed’s free-money policies, went up
$400bln. Putting that in perspective, it went down by $500bn during the GFC...”
"...The juxtaposition of the various policy responses
is somewhat breathtaking. Since 2018, M2 in the US has grown 25% more than nominal
GDP; a 25% increase in liquidity. In China M2 to nominal GDP is where it was 3 years
ago. So China hasn't borrowed anything from their future
and we've had a massive liquidity input and frankly very little
investment. It's primarily been transfer payments and Fed Stimulus...
...I'm quite constructive on a number of names in Taiwan,
in Korea, in China, in Singapore. Long-term Asia is going to be an outperformer
vs the US, and especially the currency market. Net investment into China just
passed the US ever this year, and it's the beginning rather than the end of a
trend."
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:30pm 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
dipped about 1pt to 3910.
-VIX rose about 2% to 21.99.
-The yield on the 10-year
Treasury dipped to 1.130%.
The markets are priced to
perfection. The chip shortage is
beginning to get more press from companies that are impacted by the shortage.
This does not fit with a “perfection” scenario so the risk of correction seems
higher now, even if the indicators have not turned down. This is not
surprising, since indicators work on trend following, divergences and
imbalances within the markets. Those would take a while to develop. Of course,
2 small down-days does not indicate a correction; however, the Rydex-traders are
worried.
I measure Sentiment as %-Bulls (Bulls/{bulls+bears})
based on the amounts invested in Rydex/Guggenheim mutual funds. The 5-dMA of Sentiment
has been falling hard for the last 2-weeks. Usually, sentiment is wrong and the correct bet
is against an overly bullish or bearish sentiment; however, sometimes sentiment
is correct. This might be one of those
times. Rydex traders are still bullish,
but many of them are preparing for a correction.
The S&P 500 is 15.3% above its 200-dMA (Sell point is
12%.); when Sentiment is considered, the signal is also bearish. Markets are
ignoring this stat, so we may as well ignore it too, for the time being.
I still don’t see many top Indicators warning of a top –
only the % above the 200-dMA. Since the markets had been ignoring that
indicator, it looks like we can go higher.
The daily sum of 20 Indicators declined from +2 to +1 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations improved from -38 to -28 (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. Volume is Bullish; VIX, Sentiment & Price
are neutral.
It does feel like we might see
a dip greater than the 3% dip that occurred when the Index dropped to the
50-dMA not long ago. At this point, indicators aren’t confirming the “feel” so
it is just a guess. I have no guess when this pullback might begin, but as others
have pointed out, February and March have been bad months in the last 2 years.
I added Energy Select Sector SPDR Fund (XLE) to my
portfolio today. It is still paying more than 5% yield, so I can afford to wait. I sold XLE at the end of 2020 to take a loss.
I had intended to buy it back sooner, but with the S&P 500 overly
stretched, I have waited. I got tired of
waiting.
I am still conservatively positioned. I won’t rush to add more
stocks.
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 40% invested in stocks. You may wish to have a higher or lower % invested
in stocks depending on your risk tolerance. 40% is a 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.
