“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
NFIB SMALL BUSINESS OPTIMISM (Baton Rouge Business
Report)
“The NFIB Small Business Optimism Index rose to 95.8 in
February, a slight bump from January but still below the 47-year average
reading of 98. The NFIB Uncertainty Index decreased five points to 75... “The
economic recovery remains uneven for small businesses, especially those still
managing state and local regulations and restrictions.” - Bill Dunkelberg, Chief
Economist, small business association.
https://www.businessreport.com/business/small-business-optimism-rises-slightly-in-february
FAST COMMODITY PRICE CYCLE IS A HARBINGER OF SUDDEN JUMP
IN INFLATION (The Carson Report)
“The price information coming surveys of manufacturers
and service firms paint a broader uptick in general inflation, much more than
what expressed in Federal Reserve officials' future price expectations. Based
on current trends, consumer price inflation could easily top 3% in 2021. And
while policymakers may characterize the inflation uptick as transitory, broad
inflation cycles are not transitory and require monetary tightening to reverse.”
– Joe Carson. Commentary at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00pm Tuesday. 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
-Tuesday the S&P 500 jumped
about 1.4% to 3875.
-VIX fell about 6% to 24.03.
-The yield on the 10-year
Treasury slipped to 1.532%.
Looks like the pullback is
over to me, but if it isn’t, here are the pullback stats:
S&P 500 Correction Data:
-Today was Day-16 of the
correction. From top to bottom the average small correction (<10%) in the
last 10-years has lasted about 33 days.)
-The S&P 500 is down 1.5%
from its all-time high. The max drop so far has been 4.2%. The average drop
from the top for a small correction is about 8%.
-The Index is 11.3% above its
200-dMA
-The Index is 1.2% above
its 50-dMA
I took a large short position
4 March using SDS. This effectively
reduced my % of stocks invested from 60% to a more conservative 50%. I sold it in
the morning today. When I checked the numbers, I lost exactly the amount I
would have “lost” as a missed opportunity if I had sold SPY instead of buying
the SDS-ETF. Had I sold my SPY position, I would have had a loss since I purchased
it recently before the last drop. The IRS Wash rule says that if you take a
loss you cannot buy the same security back within 30-days after the sale and
30-days before a re-purchase or you would lose the ability to claim the loss. To avoid wash rule, one must wait 60-days
before buying the security back. So that was another reason for hedging with
the SDS-ETF rather than selling SPY. Clear as mud?
I mentioned yesterday that there was a 3.5
standard-deviation shift in new-highs Monday. That’s a bullish sign that is
hard to ignore. Today’s bullish action sure makes it look like the pullback is
over for the time being, although the late-day-action has been weak. Let’s hope
that’s just daily profit taking.
The daily sum of 20 Indicators
improved from +3 to +6 (a positive number is bullish; negatives are bearish);
the 10-day smoothed sum that smooths the daily fluctuations improved from -30
to -18 (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.
There have been only 7 up-days
over the last 20-days and that is mildly bullish.
The Long Term NTSM indicator
ensemble remained HOLD. Volume, Sentiment & VIX are neutral; Price
is bullish.
For the time being, I am bullish, too.
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
TUESDAY 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.
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.
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.
