PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“While I was looking for the stock market to begin the
bottoming process on [last] Monday, I definitely did not think that stocks
would literally rip to new highs in three days. That was a much less likely
scenario and one that would bother me…Unless my short-term concerns are
completely unfounded and stocks are set to explode higher, the case for a
trading range still makes sense, at least to me. While I remain positive
on the stock market over the intermediate-term, it wouldn’t be the worst thing
to see some sideways activity this month.” Commentary at…
WHO WARNS VIRUS HASN’T PEAKED (WSJ)
“The World Health Organization said Thursday it was too
early to declare a peak in the spread of the coronavirus, a day after China
marked its deadliest day since the outbreak began. Separately, Singapore—home
to the second-largest number of cases outside mainland China—reported two new
infections, including one with no apparent link to China…Though the number of
new cases world-wide declined from Wednesday’s 3,925, “this is nothing to celebrate—it’s
still a great worry,” said Mike Ryan, executive director of the WHO’s Health
Emergencies Program, speaking at a news conference in Geneva. “It’s right now
too early to make predictions on numbers.” Story at…
50,000 NEW CORONAVIRUS INFECTIONS PER DAY (MishTalk)
“10 Key Video Points
1. 50,000 new cases a day in china
2. Infections doubling every 5 days
3. Death rate is still unknown
4. China likely to peak in March
5. Epidemic peak is still a month away
6. It will be very hard to control this epidemic the say
way we did with SARS 15-20 years ago
7. Cases are always underestimated
8. Death delays are as long as three weeks
9. Reported deaths outside China are not reassuring
because of delays
10. We still don't know the full effects”
- Prof. Neil Ferguson, Vice Dean Faculty of Medicine,
Imperial College in London
See video at
“We noticed over the past few days that the
'anti-alarmists' who claimed that the outbreak wasn't even as deadly as the
seasonal flu have gradually gone quiet. Everybody who played down the
seriousness of this outbreak has been unequivocally proven wrong.” – ZeroHedge.
My cmt: While there’s a lot of “internet-bad-news” the markets
remain unconvinced, so it’s not time to panic. The bigger issue may be that the
markets are getting stretched again.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3352.
-VIX dipped about 3% to 15.04.
-The yield on the 10-year Treasury slipped to 1.574.
The S&P 500 bounced back to new highs; the Index rose
all afternoon and had a strong close. It
still seems like we could have issues with the 2019 new coronavirus and an
overstretched stock market, but so far, Mr.
Market does not agree with my caution.
The daily sum of 20 Indicators improved from +1 to
+3 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from -68 to -52. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I said Friday that I’d like to see the S&P 500 climb
above its prior high of 3330 and hold there for at least two consecutive closes
before I would consider increasing stock holdings. That’s still true. There are
more problems than just the chart: The S&P 500 is now 10.9% above its
200-dMA (12% is the level I consider as a sell warning for this indicator); when
Sentiment is added, we have a top indicator warning now; the MACD of Breadth is
bearish again; Breadth vs the S&P 500 shows that the Index is out ahead of overall
advancing-stocks, but not enough to give a bear-signal. I could list a lot of
indicators that are leaning bearish, but not many are actually at the extremes
to give us a sell signal and we have bull-signals, too.
Let’s just say the market still seems confused and somewhat
stretched.
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 10
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)
*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.
MONDAY 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
Monday, the VOLUME indicator was bullish; VIX, PRICE, and
SENTIMENT Indicators were neutral. The Long-Term Indicator is HOLD.
