“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Coronavirus is creating uncertainty in the shipping
industry — that includes the Port of Virginia. Container vessel calls at key
Chinese ports are down more than 20 percent since Jan. 20, according to
industry information source, Alphaliner.” Story at…
My cmt: This is a big drop and it will affect world-wide
trade. I just heard this story Tuesday evening on the local NBC TV affiliate.
I still suspect that the markets do not appreciate how much damage to the
economy the new corona-virus may cause, even if it is mostly contained to Asia.
NFIB SMALL BUSINESS OPTIMISM INDEX (hcPress.com)
“The NFIB Small Business Optimism Index began the year in the
top 10% of all readings in the 46-year history of the survey. The index rose
1.6 points to 104.3 in the month of January.” Story at…
JOLTS JOB OPENINGS (CNBC)
“Job openings fell to 6.4 million in December, the lowest
level since December 2017…Net, net, job openings around the country are
plummeting in a way that we hate to say looks like a recession,” said Chris
Rupkey, chief financial economist at MUFG Union Bank.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.2% to 3358.
-VIX rose about 1% to 15.18.
-The yield on the 10-year Treasury rose to 1.617.
Today was the opposite of yesterday: Market Internals
were very bullish, but the S&P 500 faded in the afternoon with a bearish
close.
The daily sum of 20 Indicators declined from +3 to
+2 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from -52 to -38. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I have been slow to get back in for several reasons: (1)
The market is stretched again. The S&P 500 is 11% above its 200-dMA. 10-15%
is the bear-zone for this indicator. When sentiment is included, we already
have a top warning. (2) I think the effects of the new corona-virus are not
appreciated by the Markets. The above piece on China’s container-ship calls
indicates that China’s economy will suffer.
Still, I am not doing a good job of following my own
rule: “Trade what you see; not what you think.” What we see is a market that is
powering higher with one or two important warning signals. What I think is that
the new corona-virus will cause issues with the markets. Hmmmm. Should I be buying?
Probably, but there are issues.
The S&P 500 has been 11% above its 200-dMA 4 times in
the past 6+ years. Each time it pulled
back, so I am expecting another dip. We’ll see.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -1
Most Recent Day with a value other than Zero: -1 on 11
February (The S&P 500 was too far above its 200-dMA when sentiment is
considered.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
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. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF)
outperformed the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked
in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted
correctly.) XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained POSITIVE / BULLISH 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. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
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 current stock allocation is about 45% invested in
stocks as of 27 January (down from 60%). This is a conservative position appropriate
for a retiree. You may wish to have a higher or lower % invested in stocks
depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the VOLUME, VIX, PRICE, and SENTIMENT Indicators
were neutral. The
Long-Term Indicator is HOLD.
