“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.
NAHB HOUSING MARKET INDEX (Advisor Perspectives)
“Strong buyer demand helped to offset supply-side
challenges relating to building materials, regulation and labor as builder
confidence in the market for newly built single-family homes inched down one
point to 80 in July...” Charts/commentary at...
CORRELATION COEFFICIENT WITH VIX INDEX (McClellan
Financial Publications)
“The VIX Index is making higher lows which is not in keeping
with the higher price highs of the SP500. Normally the two move in opposition,
and it is a warning of trouble when higher price highs are accompanied by
higher VIX readings.” Analysis at...
This was posted by McClellan last week.
BEARS GETTING TO DANCE (Heritage Capital)
“I would expect Monday to be a red day across the board
with the bulls attempting to stabilize the ship on Tuesday. I am keenly
watching if any of the beaten down indices begin to lead, like the Russell
2000. Additionally, there are many sectors that have been bludgeoned, like my
banks and energy. Watch to see if any of those get interest at the expense of
technology.” Commentary at...
https://investfortomorrow.com/blog/bears-getting-to-dance/
KNOWLEDGE VS EXPERIENCE: WHY MOST INVESTORS WIND UP
LOSING (RIA)
“...every great investor in history, in different forms,
has one basic investing rule in common: “Don’t lose money.” The reason is
simple; if you lose your capital, you are out of the game. Many young investors
with “knowledge” today will eventually gain a lot
of “experience” by giving most of their gains. It is one of the
oldest stories on Wall Street.” Commentary at...
https://realinvestmentadvice.com/knowledge-vs-experience-why-most-investors-wind-up-losing/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 9:00 PM 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.
After a slow reporting weekend, today’s new-case numbers
were very high. The 10-dMA of new cases was 32,000 cases today, about double
what it was 10-days ago.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped about 1.6% to 4258.
-VIX jumped about 22% to 22.50.
-The yield on the 10-year Treasury slipped to 1.194%, a
level not seen since February.
DISTRIBUTION DAY: “A distribution day is a significant
decline in the Nasdaq or S&P 500 in higher volume than was seen in the
previous session. IBD [Investors Business daily] defines a ‘significant decline’
as a drop of more than 0.2%, with no rounding up. A distribution day indicates
unusually heavy selling by institutional investors, the heavyweights who
largely set a market's direction.” From
Today was Distribution Day #7 in the last 3 weeks of trading.
A number greater than 5 is considered bearish.
Today was also a statistically-significant, down-day
under my system which often (about 60% of the time) is followed by an up-day. Bottoms
almost always occur on Statistically-significant, down-days, but not all
statistically-significant down days are bottoms. So, is this a bottom?
With the data available, I can’t call a bottom. The down
move, even at 1.6%, was not enough to trigger my “Panic Indicator” that sometimes
signals bottoms or, alternatively, serious panic and further declines. Additionally,
volumes are increasing on the NYSE. Increasing volume probably means there is
more dip to come; but there are some bullish signs.
The Advance/Decline ratio is oversold (a measure of
Breadth); Bollinger Bands are close to oversold, but not there yet; chart wise,
the Index is very close to its lower trend line and is only 0.4% above its
50-dMA. That may or may not be bullish – trend lines are made to be broken.
As we suggested Friday, indicators have turned quite
bearish over the last week a pullback seemed in the works. At today’s close,
the index is down 2.8% so it’s not much of a pullback so far.
The daily sum of 20 Indicators declined from -10 to -14
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations fell from -42 to -61. (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
remained HOLD. Volume is bearish; VIX, Price & Sentiment are neutral.
I expect more weakness. As
noted previously, the main clues are that Breadth (10-dMA of % of issues
advancing on the NYSE) keeps falling and my basket of internals remains
negative.
In spite of my expectation, further
declines are certainly not a given. The markets may simply bounce up from here,
like it has when it reached the 50-dMA in the recent past. We’ll see...
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 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 15 July, my
stock-allocation is about 45% invested in stocks since I took profits in XLE
due to its falling momentum. I’ll probably wait to see what the market is doing
before I put those funds back to work. I am not super bullish (or bearish) and
I am watching the markets closely.
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.
