“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
GOING TO CASH CAN BE COSTLY (RIA)
“When it comes to “going completely to cash” in
portfolios, such action triggers numerous emotional behaviors that negatively
impact portfolio outcomes. Over the past decade, I have met with numerous
individuals who “went to cash” in 2008 before the crash. They felt
confident in their actions at the time. However,
that “confidence” gave way to “confirmation bias” after the
market bottomed in 2009. Nevertheless, they remained convinced the “bear
market” was not yet over and continued to seek out confirming information.
As a consequence, they remained in cash.” Commentary at...
https://realinvestmentadvice.com/going-to-cash-can-be-as-costly-as-a-market-crash/
My cmt: This article discussed going to “all cash.” I
don’t go to all cash. I generally drop
to about 30% invested in stocks as a fully defensive position. If the market crashes down 50%, I would lose
15% of the total portfolio value. If I
am wrong and the market goes up, I am still making some money.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00 PM ET Friday. U.S. total case numbers are on the left axis; daily
numbers are on the right side of the graph in Red with the 10-dMA of daily
numbers in Green. I added the smoothed 10-dMA of new cases (in purple) to the
chart.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 1% to 4621.
-VIX rose about 5% to 21.57.
-The yield on the 10-year Treasury was 1.407%.
Today was Triple Witching (Options contracts expiration)
and it caused huge volume on the NYSE.
Volume was nearly double the monthly average. That can confuse my
indicators since positioning for options may not accurately reflect the market
as a whole. Even so, there are plenty of issues to worry about.
I noted below in the “Bear Category” that 1.7% of all
issues traded on the NYSE made new, 52-week highs when the S&P 500 made a
new all-time-high, 10 December. The Index was essentially at that level again on
15 December when it closed only 2 pts below the prior high. On that day, only 2% of all issues traded on
the NYSE made new, 52-week highs. This just
confirms that the advance has gotten dangerously narrow; not enough stocks are
participating.
The Friday run-down of some important indicators turned
to the Bear side (16-bear and 5-bull) and was a switch back toward Bear numbers
from 2 weeks ago. These indicators tend to be both long-term and short-term, so
they are different than the 20 that I report on daily. Details follow:
BULL SIGNS
-The smoothed advancing volume on the NYSE is rising.
-The 10-dMA % of issues advancing on the NYSE
(Breadth) is above 50%.
-My Money Trend indicator is climbing.
-Short-term new-high/new-low data is rising.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA
are both ABOVE the 20-dEMA.
NEUTRAL
-The S&P 500 has had 2 Distribution Days in the last
25-days; Neutral. Others were cancelled by a Follow-thru day 15 December.
-The S&P 500 is 6.7% above its 200-dMA (Bear
indicator is 12%.). This value was 15.9% above the 200-dMA when the 10% correction
occurred in Sep 2020.
-Non-crash Sentiment indicator is very bullish (96%-bulls
on a 5-day basis), but not enough to send a bear signal. (Too bullish is
bearish.)
-Bollinger Bands are neutral.
-Back-to-back >80% up-volume days cancelled two prior
high, down-volume days and gave a bullish buy signal on 7 December. This signal
has expired.
-Overbought/Oversold Index (Advance/Decline Ratio) is neutral.
-RSI is neutral.
-16 December, the 52-week, New-high/new-low ratio
improved by 3.4 standard deviations, bullish, but not quite enough to send a
signal.
-The Fosback High-Low Logic Index is neutral.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-The Calm-before-the-Storm Indicator was warning; then
there were 2 Panic Indicators on 26 & 30 November suggesting more downside
to come. – Signal has expired.
-There have been 9 up-days over the last 20 sessions –
Neutral.
-There have been 5 up-days over the last 10-sessions –
Neutral.
-53% of the 15-ETFs that I track have been up over the
last 10-days. (Too close to call.)
BEAR SIGNS
-There have been 6 Statistically-Significant days (big
moves in price-volume) in the last 15-days. This can be a bull or bear. Recently,
the signals have been bouncing up and down.
That can be a topping signal – let’s call it bearish.
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is below 50% today.
-The 50-dMA % of issues advancing on the NYSE (Breadth) has
been below 50% for 5 consecutive days.
-The 100-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 11 November; it was close to a bullish
cross, but is now getting more bearish.
-Breadth on the NYSE is too low when compared to the
S&P 500 index.
-MACD of S&P 500 price made a bearish crossover, 17
December. This has bounced back and forth over the last week.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-Long-term new-high/new-low data is falling.
-1.7% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high, 10 December. Only 2% made
new, 52-week highs when the S&P 500 made a new all-time-high 10 December
This is very bearish. (There is no bullish signal for this indicator.)
-McClellan Oscillator.
-There were 5 Hindenburg Omen signals 17-24 November. These have been cancelled because the
McClellan Oscillator turned positive. There were more Omens on 13 & 16
December.
-VIX is rising sharply.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500.
-The Smart Money (late-day action) is falling. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-The S&P 500 is under-performing the Utilities
ETF (XLU).
On Friday, 21 February, 2 days after the top before the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there
are 16 bear-signs and 5 bull-signs. Last week, there were 8 bear-signs and 12
bull-signs.
Today was a statistically significant down-day. That just
means that the price-volume move exceeded my statistical parameters. Statistics
show that a statistically-significant, down-day is followed by an up-day about
60% of the time.
The daily sum of 20 Indicators declined from -1 to zero
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -31 to -18 (The trend is more
important than the actual number for the 10-day value.) These numbers sometimes
change after I post the blog based on data that comes in late. Most of these
indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator
ensemble remained HOLD. VIX remained bearish; Volume, Price & Sentiment are
Neutral.
Bottom line, it looks like the S&P 500 will test its 50-dMA, about 0.4%
below today’s close. If it breaks below and holds there, I’ll sell stocks if
indicators are still negative.
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 improved to BUY – an odd outcome given the recent
weakness. It just shows that today’s market is somewhat stronger than it was a
few weeks ago. It doesn’t necessarily mean that today’s market is good. Still,
it’s hard to sell when the short-term indicator is bullish.
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.
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 general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
