“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.
Discussing Democratic spending proposals: "If I was
Darth Vader and I wanted to destroy the US economy, I would do aggressive
spending in the middle of an already hot economy...This is the biggest bubble
I've seen in my career." - Stanley Druckenmiller, billionaire investor.
“We are trained Marxists. We are super-versed on, sort
of, ideological theories. And I think that what we really tried to do is build
a movement that could be utilized by many, many black folk.” - Patrisse Khan-Cullors,
co-founder of Black Lives Matter.
IHS MARKIT FLASH US COMPOSITE PMI (IHS Markit)
“U.S. private sector companies reported a further
substantial expansion in business activity during July. That said, the rate of
growth eased for the second month running to the softest since March, as firms
continued to report widespread capacity constraints. Adjusted for seasonal
factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 59.7 in
July, down from 63.7 in June.” Press release at...
https://www.markiteconomics.com/Public/Home/PressRelease/5c13aaa0acb3461eb9acd7113cd2bb40
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 7:30 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.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 1% to 4412.
-VIX declined about 3% to 17.20.
-The yield on the 10-year Treasury slipped to 1.276%.
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
-Today’s Follow-Through-Day cancels the bearish
Distribution Days we have seen recently.
-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%.
-My Money Trend indicator.
-The smoothed advancing volume on the NYSE is rising.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-53% of the 15-ETFs that I track have been up over the
last 10-days.
-The Smart Money (late-day action) turned up today, 23
July. (This indicator is based on the Smart Money Indicator developed by Don
Hayes).
NEUTRAL
-Bollinger Bands are very close to oversold, but remain neutral.
-RSI.
-Statistically, the S&P 500 gave a panic-signal, 18
June, but the signal has expired.
-Non-crash Sentiment indicator remains neutral, but it is
very bullish and that means the signal is leaning bearish.
- 4.5% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made a new all-time-high today, 23 July. (There
is no bullish signal for this indicator.) This is below average but not quite
enough to send a bear signal – something to watch.
-The Fosback High-Low Logic Index is neutral.
-There have been 14 up-days over the last 20 days.
Neutral
-There have been 5 up-days over the last 10-days.
-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.
-VIX.
-Overbought/Oversold Index (Advance/Decline Ratio) is
neutral.
-20 July, the 52-week, New-high/new-low ratio improved by
0.9 standard deviations, somewhat bullish, but neutral.
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.
-MACD of S&P 500 price made a bearish crossover, 16
July.
-Breadth on the NYSE compared to the S&P 500 index
has slipped to bearish, today, 23 July.
-Short-term new-high/new-low data is falling.
-Slope of the 40-dMA of New-highs is falling. This is one
of my favorite trend indicators.
-McClellan Oscillator is bearish.
-The S&P 500 is 12.7% 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.
-Cyclical Industrials (XLI-ETF) are under-performing the
S&P 500 - bearish.
-Long-term new-high/new-low data is falling.
-There have been 5 Statistically-Significant days in the
last 15-days. This can be a bull or bear signal. Since the S&P 500 is at the upper trend
line- Bearish.
-The S&P 500 is out-performing the Utilities ETF
(XLU), but it is trending in the wrong direction so I will put this in the BEAR
category.
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 12
bear-signs and 8 bull-signs. Last week, there were 12 bear-signs and 4
bull-signs.
Indicators improved, but I had
expected the indicators to improve more than they did; but Bear signs still
outnumber bull signs.
The daily sum of 20 Indicators declined from -2 to -5 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations declined from -72 to -74. (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, VIX, Price & Sentiment are neutral.
In stunning fashion, the S&P 500 has managed to go
from the bottom trendline to the top trendline and make a new-high all in 4
days of trading. Wow. That may be too Bullish.
Today was a statistically
significant up-day. That just means that the price-volume move exceeded my
statistical parameters. Data shows that a statistically-significant, up-day is
followed by a down-day about 60% of the time. Tops occur at statistically-significant,
up-days, but not all statistically-significant, up-days are tops. Was this a
top? I have 3 top-indicators that are warning.
It would take a few more for me to call a top. It could still be a top,
but we’ll just have to wait for confirmation – more top-signs or a price drop.
Otherwise, I remain cautiously
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
There were only 2 ETFs down
today: Emerging Markets and Energy. I
won’t have too much patience with the Energy ETF XLE-ETF. If it couldn’t go up today, that’s an
issue.
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.
My stock-allocation is about 50%
invested in stocks. 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.
