“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.
EARNINGS (FACTSET)
“At this point in time, more S&P 500 companies are
beating EPS estimates for the fourth quarter than average, and beating EPS
estimates by a wider margin than average. As a result, the index is reporting
higher earnings for the fourth quarter today relative to the end of last week
and relative to the end of the quarter. Despite the increase in earnings, the
index is still reporting a year-over-year decline in earnings, mainly due to
the negative impact of COVID-19 on a number of industries within the index.
But, if earnings continue to surpass estimates at current levels, it is
possible the index will report year-over-year earnings growth for the quarter
for the first time since Q4 2019.” Earnings report at...
https://insight.factset.com/sp-500-earnings-season-update-january-29-2021
IHS PMI (MarkitEconomics)
“The performance of the global manufacturing sector
remained solid at the start of 2021. Although the J.P.Morgan Global
Manufacturing PMI™ – a composite index produced by J.P.Morgan and IHS Markit in
association with ISM and IFPSM – fell to a three-month low of 53.5 in January,
down from 53.8 in December, it remained at one of its highest levels over the
past three years.” Press release at...
https://www.markiteconomics.com/Public/Home/PressRelease/4d3239abde834c8f99f518d378422ab7
ISM MANUFACTURING (ISM)
“The January Manufacturing PMI® registered 58.7
percent, down 1.8 percentage points from the seasonally adjusted December
reading of 60.5 percent. This figure indicates expansion in the overall economy
for the eighth month in a row after contraction in March, April, and May.” Press release at...
CONSTRUCTION SPENDING
U.S. construction spending rose a moderate 1% in December
as strength in home building offset continued weakness in nonresidential
construction. The increase followed a 1.1% gain in November...” Story at...
SENTIMENT RIPE – MARKET HAS SOLID FOUNDATION (Heritage
Capital)
“Over the weekend, someone asked if I thought stocks
could blow off higher like we saw into the Dotcom peak. While I supposed
anything is possible, I do not rate that scenario as plausible because the
rally remains very broad-based. In a blow off, one of the main reasons it
happens is because the masses finally go all in on the few “hot” stocks that
had been leading the market. At some point if we see only a few hundred glamour
stocks leading, I would consider a blow off possible.” – Paul Schatz,
President, Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/sentiment-remains-ripe-foundation-rock-solid/
JOHN KERRY’S ARGUMENTS FOR WASTING MONEY ON CLIMATE
CHANGE (MISH TALK)
"There are countless economic analyses now that show
it's now cheaper to deal with the crisis of climate than it is to ignore it.” –
John Kerry, the United States Special Presidential
Envoy for Climate.
CO2 Stats
-Please note that the US reduced its carbon footprint from
6.13 billion tons in 2007 to 5.28 billion tons in 2019.
-Meanwhile, China increased its footprint from 6.86
billion tons in 2019 to 10.17 billion tons in 2019.
-In the same timeframe, global output rose from 31.29
billion tons to 36.44 billion tons.
-In 2007, the US accounted for 19.6% of the total global
carbon footprint.
-In 2019, the US accounted for only 14.5% of the total
global footprint.”
Commentary at...
My cmt: As can be seen above, the US has been doing its
part on reducing CO2, the primary greenhouse gas. The rest of the world – not
so much. Any rational person would say that we shouldn’t be in the Paris
Climate Agreement since it gives the rest of the world, especially China and
India, a pass. The result is, our economy is at a disadvantage,
disproportionally hurting middle class Americans. Unfortunately, this all seems
to be about Politics (getting elected) – not climate change. The Biden
Administration canceled the Keystone Pipeline and its 10,000 jobs. That means the Canadian oil will continue to
be carried across the US by rail and truck at a much greater carbon footprint,
and much greater hazard, than by pipeline. F’ing Politicians! As much as I
disliked Trump, he was right about the Paris Climate Agreement and the Keystone
Pipeline. One of his problems was that he
was so inarticulate and arrogant that he didn’t bother explain his positions.
BIDEN DERIDES TRUMP PLAN WHILE USING TRUMP PLAN
(Bloomberg)
“President Joe Biden and his top advisers have derided
the Trump administration’s playbook for distributing coronavirus vaccines, but
so far have made only modest changes to the plan that’s meeting their target
pace of more than one million shots a day.”
Story at...
Did I say that I hate Politicians? This isn’t some
right-wing site pointing out Biden’s lies.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:15pm Monday. 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
-Monday the S&P 500 rose
about 1.6% to 3774.
-VIX dropped about 9% to 30.24.
-The yield on the 10-year
Treasury rose to 1.078%.
After Friday’s big downturn it
was not surprising to see today’s positive result. The next couple of days should decide whether
the correction continues, or is postponed again. I expect it to continue.
The daily sum of 20 Indicators improved from -12 to -7 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations declined from -49 to -51. (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 SELL. Volume & VIX
are Bearish. Sentiment & Price are neutral. The last time my NTSM Long-Term
Indicator was as negative as it was on 29 Jan, was 4 days after the Coronavirus
Top, on 19 February 2020. That’s not a guarantee that we’ll see a 20%-correction,
but it is concerning.
S&P 500 “correction” data:
-Day 5
-S&P 500 down 2.1% from
the top – that’s hardly worth calling it a correction.
-1.5% above the 50-dMA. (The
S&P 500 closed at the 50-dMA.)
-12.5% above the 200-dMA.
Avg Length of < 10% Corrections:
33-trading days
Avg Length of > 10% Corrections:
61-trading days (ignoring crashes)
I doubt that the pullback is
over.
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
MONDAY 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.
