“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
“This country was founded by the bayonet;
it survives by the ballot. Those 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
“In my decades of investing experience, I have not seen
such mindless and uninformed speculation as I have witnessed recently. Indeed, in nominal
dollar terms...it is far in excess of the dot.com boom.” – Doug Cass.
THE FED WILL NOT EXTEND A PANDEMIC CRISIS RULE THAT
ALLOWED BANKS RELAX CAPITAL LEVELS (CNBC)
“The Federal Reserve on Friday declined to extend a
pandemic-era rule that relaxed the amount of capital banks had to maintain
against Treasurys and other holdings, in a move that could upset Wall Street
and the bond market. In a brief announcement, the Fed said it would allow a
change to the supplementary leverage ratio to expire March 31. The initial
move, announced April 1, 2020, allowed banks to exclude Treasurys and deposits
with Fed banks from the calculation of the leverage ratio.” Story at...
My cmt: Technically, this affects bank SLR, Supplementary
Leverage Ratio.
MORE ON SLR (for geeks) FROM JP MORGAN
“A new rule [a year ago] on calculating the supplementary
leverage ratio—a capital adequacy measure—allows expanded balance sheets and
potentially greater expansion of quantitative easing...The Federal Reserve
(Fed) announced on April 1, 2020 that it would temporarily exclude U.S.
Treasuries (USTs) and banks’ deposits with the Fed (Fed deposits) from its
calculation of banks’ supplementary leverage ratio or SLR. The action is the
latest [a year ago] aggressive measure by the Fed...to help ensure the flow of
risk and liquidity through the financial system. It is set to last until March
31, 2021...The SLR is measure of capital adequacy...Essentially, it measures in
percentage terms a bank’s ability to take losses on its assets. The formula is
SLR = (tier 1 capital)/(total leverage exposure). This change reduces the
denominator in the SLR calculation and as a result temporarily increases banks’
SLR. With more capacity in the SLR, it should increase banks’ ability to take
risk.”
Bank stocks fell on the news and the XLF (Financial
Sector ETF) was down 1.1% on the day. In the longer term, higher interest rates
should help the banks.
CASS FREIGHT INDEX (CASS Information Systems)
“The shipments component of the Cass Freight Index® was
impacted by the polar vortex event in mid-February, slowing the y/y growth rate
to 4.1% in February from 8.6% in January, as anticipated in the latest ACT
Freight Forecast report released earlier this month. The shipments index
increased 1.8% m/m from January, which was well below the usual seasonal
increase. When we seasonally adjust the index, February shipments were down
3.2% m/m.” Commentary & analysis at...
https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/february-2021#freight
MARGIN DEBT AND THE MARKET (Advisor Perspectives)
Charts and discussion at...
MARGIN DEBT CONFIRMS MARKET EXUBERENCE (Seeking Alpha)
“The issue with margin debt, in particular, is that the
unwinding of leverage is NOT at the investor's discretion. It is at the
discretion of the broker-dealers that extended that leverage in the first
place. (In other words, if you don't sell to cover, the broker-dealer will do
it for you.) When lenders fear they may not recoup their credit-lines, they
force the borrower to either put in more cash or sell assets to cover the debt.
The problem is that "margin calls" generally happen all at once, as
falling asset prices impact all lenders simultaneously. Margin debt is NOT an
issue - until it is.” – Lance Roberts
https://seekingalpha.com/article/4393677-technically-speaking-margin-debt-confirms-market-exuberance
My cmt: Peaks in margin debt coincide with peaks in the
Market. Is this the peak? We don’t know, but the odds are against it, simply
because peaks happen all the time.
BIGGEST FED DAY EVER- PHOOHEY (Heritage Capital)
“...let’s be real. A 1.67% yield is not going to cause
the economy to crash. Pre-COVID, yields were 2% and then 2.6% two years ago.” –
Paul Schatz, President Heritage Capital. Commentary at...
https://investfortomorrow.com/blog/the-most-important-fed-day-ever/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:00pm 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.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 slipped
about 0.1% to 3913.
-VIX dipped about 3% to 20.95.
-The yield on the 10-year
Treasury rose to 1.726%.
Today was a Quadruple witching-day. “Quadruple witching
refers to a date on which stock index futures, stock index options, stock
options, and single stock futures expire simultaneously.”- Investopedia.
Volume was extremely high on the NYSE, but the price
remained little changed for the S&P 500. I think I’ll say the glass is
half-full on that result.
Here’s Friday’s 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
-The 10-dMA of issues advancing on the NYSE
(Breadth) is above 50%
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA of the % of issues advancing on the
NYSE (Breadth) is above 50%.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 10 Mar
-MACD of S&P 500 price made a bullish crossover 11
Mar.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-Short-term new-high/new-low data is rising.
-93% of the 15-ETFs that I track have been up over the
last 10-days – bullish.
-The S&P 500 is outperforming Utilities ETF (XLU).
NEUTRAL
-Overbought/Oversold Index (Advance/Decline Ratio) is neutral.
-Bollinger Bands extended, but neutral.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-VIX is neutral.
-The Fosback High-Low Logic Index is neutral.
-RSI.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means it is leaning bearish.
-Distribution warnings. There have been 4 Distribution
days in the last 25-trading days.
-We’ve seen 6 up-days over the last 10-days. Neutral.
-There have been 10 up-days over the last 20 days.
Neutral
-The market has broadened out; 7% of all issues traded on
the NYSE made new, 52-week highs when the S&P 500 made a new all-time-high
today, 17 Mar. (there is no bullish signal for this indicator.)
-Statistically, the S&P 500 gave a panic-signal, 27
January. The signal has expired.
-8 Mar, the 52-week, New-high/new-low ratio improved by 3.5
standard deviations very bullish, but the signal has expired.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to give a signal.
-There have been 4 Statistically Significant days in the
last 15-days. This signal can be Bearish or Bullish.
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-The S&P 500 is 11.3% above its 200-dMA (Sell point is
12%.); but when Sentiment is considered, the signal is bearish.
-The Smart Money (late-day action) is headed down. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-My Money Trend indicator is bearish.
-McClellan Oscillator is negative.
-Slope of the 40-dMA of New-highs is falling.
-Long-term new-high/new-low data is falling.
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 7 bear-signs
and 10 bull-signs. Last week, there were 3 bear-signs and 18 bull-signs.
The indicators have shifted to
more to the bear side, but I am not too concerned at this point. They are about evenly
balanced.
The daily sum of 20 Indicators
slipped from +1 to -1 (a positive number is bullish; negatives are bearish);
the 10-day smoothed sum that smooths the daily fluctuations remained +54 (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; Price, VIX & Sentiment are
neutral.
Dip buyers arrived today, but they chickened out in the
last hour of trading. Still, the index was only down a couple of points
compared to Thursday’s close. The bears couldn’t drive the Index down very far,
so perhaps the bulls will retake control on Monday.
I remain bullish.
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 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.
As of 9 March, my
stock-allocation is about 60% invested in stocks. You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees.
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, and I can call a bottom, 80% would not be out of the question.
The markets have not
retested the lows on recent corrections and that left me under-invested on the
bounces. I will need to put less reliance on retests in the future.
