“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
“People always ask me what is going on in the markets. It
is simple. Greatest Speculative Bubble of All Time in All Things. By two orders
of magnitude.” – Michael “Big Short” Burry.
“I never imagined that I would see the day that the
Chairman of the House Judiciary Committee would step forward to call for raw [Supreme]
court packing. It is a sign of our current political environment where rage
overwhelms reason.” - Professor Jonathan Turley, honorary Doctorate of Law from
John Marshall Law School for his contributions to civil liberties and the
public interest.
FED’S BULLARD: FIRST RATE HIKE AS SOON AS 2022 (CNBC)
“St. Louis Federal Reserve President James Bullard told
CNBC on Friday that he sees an initial interest rate increase happening in
late-2022 as inflation picks up faster than previous forecasts had anticipated.
That estimate is even quicker than the outlook the
broader Federal Open
Market Committee released Wednesday...” Story at...
WATCH THE REACTION NOT THE NEWS (Heritage Capital)
“Friday is a huge quarterly derivatives expiration.
Stocks are in a very weak seasonal period. Lots of crosscurrents here. Our
index portfolios strongly transitioned to large cap and growth. Our sector
strategy has held firm in banks, energy and materials which were hit hard on
Wednesday and Thursday. It also owns healthcare and mega cap tech. The bull
market isn’t over, so no one needs to ask that question. The period of
digestion continues, something I have discussed many times. It’s okay. More new
highs should follow.” Paul Schatz, President, Heritage Capital. Commentary
at...
https://investfortomorrow.com/blog/watch-the-reaction-not-the-news/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 PM 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. The
10-dMA of new cases was about 8,000.
That’s a new low and continues the good news of lower cases. The bad
news is that the curve is flattening and we may see this level of cases for a
while.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dropped
about 1.3% to 4166.
-VIX jumped about 17% to 20.70.
-The yield on the 10-year
Treasury dipped to 1.438%.
There was a bearish finish today as the selloff accelerated into the close. Volume was extreme, about 50% above the monthly average. Normally that would suggest the pullback has farther to go, but today was options expiration so high volume is expected and may not be giving us a clear signal.
Today was a statistically
significant down-day. That just means that the price-volume move exceeded my
statistical parameters. Data shows that a statistically-significant, down-day
is followed by an up-day about 60% of the time. Bottoms usually occur on statistically
significant down-days. Perhaps...
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
-There was a Bollinger Squeeze
signal today, 18 June. A Bollinger
Squeeze can be bullish or bearish. With RSI close to oversold, we need to
consider the Squeeze indicator as bullish.
-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%.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-Statistically, the S&P 500 gave a panic-signal, today,
18 June. This one can be bearish or bullish. Based on recent history, the
50-dMA and the lack of bearish top-indicators at the recent top, I’ll call this
bullish, but I could be wrong.
-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.
-The S&P 500 is out-performing the Utilities ETF
(XLU), and trending higher, so I’ll still call this one bullish.
NEUTRAL
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-The S&P 500 is 9.7% above its 200-dMA (Sell point is
12%.). This value was 15.9% above the 200-dMA when the 10% correction occurred
in Sep 2020.
-We had 5 Distribution Days recently, but not enough to
send a signal.
-Bollinger Bands are very close to oversold (a bullish
sign) but RSI has farther to go, so I’ll call this neutral.
-RSI – leaning toward, oversold but not there yet..
-VIX is rising but not fast enough to send a signal -
neutral.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means the signal is leaning bearish.
-The Fosback High-Low Logic Index is neutral.
-There have been 4 up-days over the last 10-days.
Neutral.
-There have been 10 up-days over the last 20 days.
Neutral
-The Smart Money (late-day action) is flat. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-Overbought/Oversold Index (Advance/Decline Ratio).
-There have been 3 Statistically-Significant days in the
last 15-days. Neutral.
-The market remains fairly broad; 7.6% of all
issues traded on the NYSE made new, 52-week highs when the S&P 500 made a
new all-time-high 11 June. This is above average. (There is no bullish signal
for this indicator.) Currently, the value is above average and suggests that if
we do have a correction from here it would likely be less than 10%.
-14 May, the 52-week, New-high/new-low ratio improved by 0.7
standard deviations, somewhat bullish, but not enough to give a signal.
BEAR SIGNS
-The 10-dMA of issues advancing on the NYSE
(Breadth) is below 50%
-MACD of the percentage of issues advancing on the NYSE (breadth)
made a bearish crossover 16 June.
-McClellan Oscillator is bearish.
-MACD of S&P 500 price made a bearish crossover 17 June.
-My Money Trend indicator is headed down.
-Slope of the 40-dMA of New-highs is falling.
-The smoothed advancing volume on the NYSE is falling.
-Short-term new-high/new-low data is.
-Long-term new-high/new-low data is falling.
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500; but the spread is falling sharply so I’ll put this in the bear
category.
-39% of the 15-ETFs that I track have been up over the
last 10-days.
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 11
bear-signs and 7 bull-signs. Last week, there were 5 bear-signs and 14
bull-signs.
The daily sum of 20 Indicators dropped from -6 to -12 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum that
smooths the daily fluctuations dropped from +45 to +26. (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 bearish; Price, VIX, & Sentiment are
neutral.
I suggested earlier that the
50-dMA would be the bottom or near the bottom for this pullback. As of today’s
close, the Index is 0.4% below its 50-dMA, so perhaps we’ve made a bottom. The
Panic Indicator often indicates a bottom on small pullbacks. Unfortunately, if this isn’t a bottom, the
Panic Indicator is warning of a lot more drop to come.
I am leaning bullish, but
Monday will give us a big clue of the pullback status. A big down-day would not
be good.
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 switched to BEARISH 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 25 May, my
stock-allocation is about 50% invested in stocks. I am not super bullish, but I
am not bearish either so 50% is a reasonable allocation for me.
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.
