Chicago PMI … Consumer Confidence … Goldman Sees a Bounce – Not a Bottom … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

CHICAGO PMI (MarketWatch)

“A measure of business conditions in the Chicago region slipped to 47.8 in March from 49.0 in the prior month, according to a report from MNI. This is the ninth consecutive sub-50 reading. Any reading below 50 indicates worsening conditions.” Story at…

https://www.marketwatch.com/story/chicago-pmi-slips-to-478-in-march-report-2020-03-31

 

CONSUMER CONFIDENCE (MarketWatch)

“Consumers started to rapidly lose confidence in the economy in March as a deadly coronavirus spread…The closely followed index of consumer confidence fell to 120 in March from a revised 132.6 in February…” Story at…

https://www.marketwatch.com/story/consumer-confidence-sinks-in-march-to-32-month-low-and-its-going-to-keep-falling-2020-03-31

 

GOLDMAN SEES A BEAR BOUNCE – NOT A BOTTOM (ZeroHedge)

“Taking the experience of the bear markets since the 1980s, including the collapse of the technology bubble in 2000-2002 and the GFC in 2008, we see a pattern of rebounds before the market reaches a trough…For example, during the GFC there were 6 rallies similar to the one we had last week. Below we show the 18 global bear market rallies since the dot-com bubble….On average, they last 39 days and the MSCI AC World return is almost 15%.” Story at…

https://www.zerohedge.com/markets/too-early-still-too-high-goldman-sees-bear-bounce-not-market-turn

 

MARKET REPORT / ANALYSIS         

-Tuesday the S&P 500 dropped about 1.6% to 2586.

-VIX dropped about 6% to 53.54.

-The yield on the 10-year Treasury dipped to 0.677.

 

The Index is currently down 23.7% from its all-time high and the rally has retraced 30% of the drop.  The first Fibonacci retracement level would be 38%, with additional levels at 50% and 62% (for those who believe in Fibonacci numbers – I am not convinced). 

 

The today’s intra-day high represented a 35% retracement from the low back toward the prior high. The first Fibonacci level is 38% so we might have seen some resistance at the 38% retracement level. For the most part, we didn’t learn anything new.

 

My guess is that the end of this rally will be punctuated by a big up day. That hasn’t  happened yet, so I think the rally will continue.

 

Overall, the daily sum of 20 Indicators slipped from +9 to +4 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from -16 to -4. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I suspect we have seen the low or close to it. That doesn’t mean we won’t have a retest of that low or that the market can’t take prices lower. I will wait for a retest before adding further to stock holdings and I still might take profits on the ongoing rally if I get worried.

 

RECENT STOCK PURCHASES - I plan to set Stop orders to try to protect recent purchases from extreme losses if this market turns down.

-SSO. (2x S&P 500 ETF) I will sell my SSO position when I think the rally is over. This is a true trading position. Other recent purchases may or may not be long-term holds – just depends on market action and indicators.

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too.

-Apple. China is returning. #1 in momentum before the crisis.

-Intel. Low PE; good story (laptops are in demand for working at home); good momentum before the crisis. 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.

-Starbucks. China is returning and they should do better than most in earnings here in the US.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +6**   

Most Recent Day with a value other than Zero: +5 on 30 March. (The S&P 500 is too far below its 200-dMA when sentiment is considered; Non-Crash Sentiment is bullish; Breadth has made a bullish divergence from the S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low Logic Indicator is bullish; and Smart Money {late-day-action} is oversold.)

(1) +10 Max Bullish / -10 Max Bearish)

(2) -4 or below is a Sell sign. +4 or higher is a Buy Sign.

 

**The Top/Bottom indicator continues to give extreme oversold readings, but as I have been saying, we won’t know when we have a bottom until we have a successful retest, or a reversal buy-signal from Breadth or Volume…Well, we had the bullish Breadth AND Volume reversal signals, but nothing is ever certain, is it?

 

MOMENTUM ANALYSIS:

CAUTION: Momentum is not a good tool during market declines.

 

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%; in this case, -100% because the market has been so bad. The rest are then ranked based on their momentum relative to the leading ETF.  The highest ranked are those closest to zero. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%, rather minus 100% since the market has been bad. The rest are then ranked based on their momentum relative to the leading stock. The highest ranked are those closest to zero.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals dropped to 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.  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 50% invested in stocks. (I previously dropped stock allocations to 45% on 27 January and lower a few days after the decline started.) You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Tuesday, the New-High/New-Low, VOLUME and NON-CRASH SENTIMENT indicators are bullish; the VIX indicator is still giving a bear signal. The and PRICE indicator is Neutral. 

 

The Long-Term Indicator DIPPED TO HOLD.  I am already at 50% invested in stocks. If we do retrace down, I’ll try to find a good buy-point.  At that time, I’ll increase stock holdings significantly.

Will We Retest the Bottom? - Expert Opinions … Market Bottom Suggested … Coronavirus (COVID19) … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“Bottom fishing is still the most expensive sport in the world.” Scott Minerd, Guggenheim Global Chief Investment Officer. 

 

"This imaginary person out there - Mr. Market - he's kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed. And when he gets really enthused, you sell to him and if he gets depressed you buy from him. There's no moral taint attached to that." - Warren Buffett

 

EXPERT OPINIONS

I am a stock market junkie – not a professional. Therefore, I listen to the experts in an effort to learn and stay agile. Here’s what some experts are saying:

 

-Sentiment Trader. “For the past 3 sessions, [Monday-Wednesday, last week] a minimum of 80% of NYSE issues have advanced and 80% of the volume went into those issues. That’s happened twice before in the past 80 years.  The 1^st kicked off the mid-80’s bull market.  The 2^nd kicked off the 2009 bull market.”

 

-Ed Yardeni, Yardeni Research: “The bottom is in; don’t fight the FED.” (paraphrased from CNCB, Tuesday.)

 

-Josh Brown, CEO of New York City-based Ritholtz Wealth Management. “I do not think the market can bottom until the virus tops.”

 

-Carter Worth, Chief Market Technician at Cornerstone Macro. Consensus now, almost Streetwide, is that we’ve put in an important low. There is even talk that we’ve entered a new Bull Mkt. Whether or not this new found enthusiasm is proved right/hopelessly misguided, the [evidence shows that the]…days/wks/mths ahead are not likely to be rewarding.” 

 

-Chris Ciovacco, Ciovacco Asst Management.   “The evidence we have in hand right now does not point to a bottom already being in place as a high probability event.”

However; Chris Ciovacco is very clear that one should be open to ALL possibilities. He has written that last Monday might have been a bottom, but there were a couple of issues that are concerning.  In a correction, the first RSI drop below 30 does not usually indicate the final bottom and that is what we saw Monday. In addition, the VIX 52-week avg needs to be falling and it isn’t. He discussed these issues and the Breadth Thrust in detail.  See his presentation on Youtube at…

https://www.youtube.com/watch?v=YwO1bdDXRUc

 

SUGGESTING A MARKET BOTTOM (MarketWatch)

“…uncertainties aside, there are several indicators that bolster the case that a recovery for the stock market may have begun, said Michael Arone, chief investment strategist at State Street Global Advisors. “The severe indiscriminate selling we saw prior to last week has abated,” he said, noting that through last Monday, nearly every asset class, including gold, U.S. Treasury bonds and stocks were being sold off. “It was that classic capitulation move to cash,” whereas in more recent sessions, bonds have rallied when stocks retreated and vice-versa, typical of normal behavior in financial markets. Another potential sign of a market bottom is action in currency markets, where the U.S. dollar has lost value in recent sessions after the Federal Reserve made aggressive moves to lower the cost of borrowing dollars and increase liquidity.” Story at…

https://www.marketwatch.com/story/these-indicators-suggest-a-stock-market-bottom-but-coronavirus-fears-could-send-the-sp-500-swooning-again-2020-03-28

My cmt: Most experts agree that a “retest is possible if not likely.” 

 

CORONAVIRUS (COVID19)

I am now projecting future virus totals based on a 10-day average of the growth factor of the number of new cases.  Growth factor is simply the number of new cases today compared to the number of new cases the day before - nothing medical; it's just math. There were roughly 159,184 cases in the US at about 6 PM this afternoon. At current growth rates, we should hit about a half-million cases in one week. There’s a lot of variability in the data, so the projections bounce a lot; projections are for exponential growth and small changes are amplified. Obviously, the numbers will depend on social distancing.

 

Worldwide, the growth factor is very close to 1, i.e., exponential growth may be nearly over and total cases would be expected to max out at about double current values. That’s true for the world, but the US is not there yet.

 

On a 10-day average, our new-cases are about 18% higher than yesterday. That still means that the number of cases are likely to double in about 4 days.

 

MARKET REPORT / ANALYSIS         

-Monday the S&P 500 rose about 3.4% to 2627.

-VIX dropped about 13% to 57.08.

-The yield on the 10-year Treasury rose to 0.723.

 

Today, there was another Breadth Thrust signal confirming that the bulls are in full stampede mode.

 

There was also a bearish, “Death Cross,” because the 50-dMA dropped below the 200-dMA. My thought on the Death Cross is, “So what?” It’s meaningless at this point, but maybe some will sell because of the scary name.

 

The Index is currently down 22.4% from its all-time high and the rally has retraced 34% of the drop.  The first Fibonacci retracement level would be 38%, with additional levels at 50% and 62% (for those who believe in Fibonacci numbers – I am not convinced). 

 

We expect this rally to retrace 50% or more of the decline based on prior rallies following waterfall declines of 15% or more. My gut feeling is that since this decline occurred so quickly, this rally may actually go farther. We’ll see. While there are estimates that GDP will fall to levels unimaginable a few months ago, one wonders whether restaurants, movies, etc. will all be back in business in June.

 

The market is looking ahead and past the coming disastrous numbers. To me it still is just guesswork whether or not we’ll have a retest of the low.

 

Overall, the daily sum of 20 Indicators improved from +5 to +9 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from -35 to -16. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I suspect we have seen the low or close to it. That doesn’t mean we won’t have a retest of that low or that the market can’t take prices lower. I will wait for a retest before adding further to stock holdings and I still might take profits on the ongoing rally if I get worried.

 

RECENT STOCK PURCHASES - I plan to set Stop orders to try to protect recent purchases from extreme losses if this market turns down.

-SSO. (2x S&P 500 ETF) I will sell my SSO position when I think the rally is over. This is a true trading position. Other recent purchases may or may not be long-term holds – just depends on market action and indicators.

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too.

-Apple. China is returning. #1 in momentum before the crisis.

-Intel. Low PE; good story (laptops are in demand for working at home); good momentum before the crisis. 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.

-Starbucks. China is returning and they should do better than most in earnings here in the US.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +5**   

Most Recent Day with a value other than Zero: +5 on 30 March. (Non-Crash Sentiment is bullish; Breadth has made a bullish divergence from the S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low Logic Indicator is bullish; and Smart Money {late-day-action} is oversold.)

(1) +10 Max Bullish / -10 Max Bearish)

(2) -4 or below is a Sell sign. +4 or higher is a Buy Sign.

 

**The Top/Bottom indicator continues to give extreme oversold readings, but as I have been saying, we won’t know when we have a bottom until we have a successful retest, or a reversal buy-signal from Breadth or Volume…Well, we had the bullish Breadth AND Volume reversal signals, but nothing is ever certain, is it?

 

MOMENTUM ANALYSIS:

CAUTION: Momentum is not a good tool during market declines.

 

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%; in this case, -100% because the market has been so bad. The rest are then ranked based on their momentum relative to the leading ETF.  The highest ranked are those closest to zero. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%, rather minus 100% since the market has been bad. The rest are then ranked based on their momentum relative to the leading stock. The highest ranked are those closest to zero.

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 improved to POSITIVE 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 50% invested in stocks. (I previously dropped stock allocations to 45% on 27 January and lower a few days after the decline started.) You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Monday, the New-High/New-Low, VOLUME and NON-CRASH SENTIMENT indicators are bullish and the was a bullish Breadth Thrust; the VIX indicator gave a bear signal. The and PRICE indicator is Neutral. 

 

The Long-Term Indicator IMPROVED TO BUY.  I am already at 50% invested in stocks. If we do retrace down, I’ll try to find a good buy-point.  At that time, I’ll increase stock holdings significantly.

PCE Prices … Personal Spending … Univ Michigan Sentiment … Stock Market Analysis… Coronavirus … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

PCE PRICES (Reuters)

"Consumer prices as measured by the personal consumption expenditures (PCE) price index edged up 0.1% in January.” Story at…

https://www.reuters.com/article/us-usa-economy/cooling-consumer-spending-inflation-put-spotlight-on-fed-amid-coronavirus-idUSKCN20M24P

 

PERSONAL SPENDING (CNBC)

“U.S. consumer spending rose moderately in February and momentum is set to fade rapidly in the coming months.” Story at…

https://www.cnbc.com/2020/03/27/us-personal-income-february-2020.html

 

MICHIGAN SENTIMENT (Rueters)

“U.S. consumer sentiment dropped to near a 3-1/2-year low in March as the coronavirus epidemic upended life for Americans, and consumer spending was sluggish in February, strengthening economists’ expectations of a deep recession…The University of Michigan’s Consumer Sentiment Index fell to a reading of 89.1 this month, the lowest level since October 2016…” Story at…

https://www.reuters.com/article/us-usa-economy-spending/us-consumer-spending-inflation-moderate-in-february-idUSKBN21E1W0

My cmt: This is the first time I’ve seen a reference to a “deep recession.”

 

MARKET REPORT / ANALYSIS         

-Friday the S&P 500 dropped about 3.4% to 2541.

-VIX rose about 7% to 65.54.

-The yield on the 10-year Treasury dropped to 0.683.

 

I don’t think we’ve had a positive Friday since mid-February, so today’s market action was not a surprise. In addition, we were due for some profit-taking. The S&P 500 climbed for most of the day and then dropped nearly 3% in the final half-hour of trading. Apparently, traders didn’t want to hold over the weekend. There was no panic though; volume was about 20% below the monthly average today and I think the rally will resume Monday or Tuesday of next week.

 

The Index is currently down 24.9% from its all-time high.

 

Time for Friday’s rundown of some important indicators.

BULL SIGNS

-FED action.

-Congressional action.

-We saw a bullish, Breadth-Thrust signal 26 March.

-We saw a 90% up-volume reversal followed by consecutive 80%+ up-volume days 24-26 March.

-MACD of S&P 500 price made a bullish crossover 26 Mar.

-MACD of stocks advancing on the NYSE (breadth) made a bullish crossover 26 Mar.

-The S&P 500 is too far below its 200-dMA giving an oversold, bull-signal when sentiment is considered.  

-Breadth on the NYSE vs the S&P 500 index remains in bull territory.

-The Smart Money (late-day-action) is oversold.

-The Smart Money (late-day action) is buying and is definitely bullish. (This is a variant of Don Hayes’, Smart Money indicator.)

-The Fosback High-Low Logic Index is Bullish. It called the top of the 20% correction in Sep-Dec 2018 to the day.

-Cyclical Industrials are turning up and gaining on the S&P 500, a bullish sign.

-Money Trend is headed up.

-New-high/new-low data is bullish.

 

NEUTRAL

-Overbought/Oversold Index, a measure of advance-decline data, is neutral. (This indicator isn’t followed much anymore, but it was overbought yesterday and we did see a large selloff today. Hmmmmm?)

-Statistically, the S&P 500 has been bearish due to several panic-signals, but it is now in the Neutral category.

-Bollinger Bands and RSI are in neutral territory.

-Over the last 20-days, the number of up-days is neutral.

-The size of up-moves has been about equal to the size of down-moves over the last month.

 

BEAR SIGNS

-The 5-10-20 Timer is SELL, because the 5-dEMA and the 10-dEMA are below the 20-dEMA. 

-VIX jumped sharply higher when the correction started and is still giving a bearish signal.

-CORONAVIRUS: Today, the number of new coronavirus cases doubled world-wide and US cases were up by 60% at 5PM. We don’t know whether the variability is caused by more testing or inconsistent reporting from Hospitals. Keeping up with statistics is probably not the number one priority at hospitals. Either way, it’s a bearish sign. Today’s projection would put the total cases at 350,000 in one week. 3 times the amount estimated just 3 days ago. My analysis is not medical; it’s just math.

-Utilities ETF (XLU) is now under-performing the S&P 500 index.

 

Just for kicks, I looked back to Friday, 21 February, 2 days after the top of this pullback. There were 10 bear-signs and 1 bull-sign. Now there are 14 bull-signs and 4 bear-signs.

It just shows we’ve had a lot of improvement in indicators.

 

Overall, the daily sum of 20 Indicators (somewhat different than the above list) declined from +9 to +5 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from -46 to -35. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I suspect we have seen the low or close to it. That doesn’t mean we won’t have a retest of that low. I will wait for a retest before adding further to stock holdings.

 

RECENT STOCK PURCHASES

-SSO. (2x S&P 500 ETF) I will sell my SSO position when I think the rally is over. This is a true trading position. Other recent purchases may or may not be long-term holds – just depends on market action and indicators.

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too.

-Apple. China is returning. #1 in momentum before the crisis.

-Intel. Low PE; good story (laptops are in demand for working at home); good momentum before the crisis. 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.

-Starbucks. China is returning and they should do better than most in earnings here in the US.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +6**   

Most Recent Day with a value other than Zero: +6 on 27 March. (The S&P 500 is too far below its 200-dMA when sentiment is considered; Non-Crash Sentiment is bullish; Breadth has made a bullish divergence from the S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low Logic Indicator is bullish; and Smart Money {late-day-action} is oversold.)

(1) +10 Max Bullish / -10 Max Bearish)

(2) -4 or below is a Sell sign. +4 or higher is a Buy Sign.

 

**The Top/Bottom indicator continues to give extreme oversold readings, but as I have been saying, we won’t know when we have a bottom until we have a successful retest, or a reversal buy-signal from Breadth or Volume…Well, we had the bullish Breadth AND Volume reversal signals, but nothing is ever certain, is it?

 

MOMENTUM ANALYSIS:

CAUTION: Momentum is not a good tool during market declines.

 

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%; in this case, -100% because the market has been so bad. The rest are then ranked based on their momentum relative to the leading ETF.  The highest ranked are those closest to zero. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%, rather minus 100% since the market has been bad. The rest are then ranked based on their momentum relative to the leading stock. The highest ranked are those closest to zero.

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 slipped to 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.  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 50% invested in stocks. (I previously dropped stock allocations to 45% on 27 January and lower a few days after the decline started.) You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Friday, the New-High/New-Low and NON-CRASH SENTIMENT indicators are bullish; the VIX and VOLUME indicators gave a bear signal. The and PRICE indicator is Neutral.  

 

The Long-Term Indicator DECLINED to HOLD.  I am already at 50% invested in stocks. If we do retrace down, I’ll try to find a good buy-point.  At that time, I’ll increase stock holdings significantly.

GDP-Third Estimate … Jobless Claims … Coronavirus (COVID19) … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“Bottom fishing is still the most expensive sport in the world.” Scott Minerd, Guggenheim Global Chief Investment Officer. 

 

"This imaginary person out there - Mr. Market - he's kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed. And when he gets really enthused, you sell to him and if he gets depressed you buy from him. There's no moral taint attached to that." - Warren Buffett

 

GDP-THIRD EST (MarketWatch)

The pace of growth in the economy was left at 2.1% in the fourth quarter in the final estimate from the Commerce Department released on Thursday.” Story at…

https://www.marketwatch.com/story/fourth-quarter-gdp-growth-expanded-at-21-rate-unrevised-from-earlier-estimate-2020-03-26

“Gross Domestic Product (GDP). GDP is simply the total amount of spending in an economy. GDP, as currently measured, does not distinguish between “good” spending and “bad” spending. GDP does not distinguish between consumption spending and investment spending. GDP also does not distinguish whether spending is generated by existing wealth, by going into debt temporarily, or by going into debt permanently. In this world, every dollar spent on education or new means of production, is counted the same as every dollar spent on epic bachelor parties and video games.” – Michael Lebowitz, Real Investment Advice.

 

JOBLESS CLAIMS (Reuters)

“The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the longest employment boom in U.S. history…Economists say the economy is already in recession…Initial claims for unemployment benefits rose 3.00 million to a seasonally adjusted 3.28 million in the week ending March 21…” Story at…

https://www.reuters.com/article/us-health-coronavirus-usa-unemployment/us-weekly-jobless-claims-soar-to-record-328-million-idUSKBN21D1WJ

 

CORONAVIRUS (COVID19)

I project future virus totals based on a 5-day average of the growth factor of the number of new cases.  Growth factor is simply the number of new cases today compared to the number of new cases the day before - nothing medical; it's just math. There were roughly 80,021 cases in the US at about 6 PM this afternoon. At current growth rates, we should hit about 200-thousand cases in one week. That’s higher that yesterday, but still lower than recent projections. There’s a lot of variability in the data, so the projections bounce a lot; projections are for exponential growth and small changes are amplified.

 

Still, it is starting to look like social distancing is working. Today, the number of new cases was about 15% higher than yesterday.  A week ago, the number of new cases was nearly double the previous day.

 

Worldwide, the growth factor was very close to 1, i.e., exponential growth may be nearly over and total cases would be expected to max out at about double current values.

 

MARKET REPORT / ANALYSIS         

-Thursday the S&P 500 rose about 6.2% to 2630.

-VIX slipped about 5% to 61.

-The yield on the 10-year Treasury slipped to 0.849.

 

I have the same problem as anyone who is attempting to time this market – I lack experience, because what we’re witnessing has not happened in our lifetime. This is not a valuation crash (2000) or a financial crash (2008). Those major crashes were more predictable in one sense; we could see a huge disruption with no end in sight. The appropriate action was to get out and then wait for a retest of the lows. This time, the end may be a few months away (at least for the stock market) and there may be a retest…or not. We don’t know.  Therefore, rather than wait and try to identify the exact bottom, I am scaling in part-way.  Later, we’ll see if we can identify the bottom.

 

I mentioned Tuesday, that a rip-your-face-off rally may be getting started. We’re here. The S&P 500 has retraced 34% of its decline in 3-days. 57% is the average retracement after a 15% waterfall decline; the median is 52% (since the post WWII era). Thus, we might see the rally die at about 2800 on the S&P 500, roughly 7% higher than today’s close.

 

The Index is currently down 22.3% from its all-time high.

 

We saw some new bull signs today to go along with the long list I wrote yesterday. Today there was a bullish Breadth-Thrust signal, because of the extreme improvement in the percentage of stocks advancing on the NYSE over a short amount of time.  This signal has only been seen 25 times since 1945, most recently on 7 Jan 2018, just 8 sessions after the bottom of the 20% correction.  

 

In addition, in the three days after the bottom, we’ve seen a 90% up-volume day on Tuesday followed by back to back 80%+, up-volume days on Wednesday and Thursday. That’s another extreme bullish sign. As stated by Lowry Research: “In approximately half the cases in the past 69 years, the 90% Upside Day, or the back-to-back 80% Upside Days, which signaled a major market reversal, occurred within five trading days or less of the market low.”

 

Last, MACD (Moving Average Convergence Divergence) of Breadth and MACD of the S&P 500 price both registered bullish crossovers. Moooo. We have some serious bull action!

 

Overall, the daily sum of 20 Indicators improved from zero to +9 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from -66 to -46. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

The S&P 500 rose about 2% in the last 15 minutes of trading.  It is possible that the Breadth-Thrust and volume signals triggered the big, late-day surge. Traders would have waited till the end of the day to be sure the signals would hold.

 

I suspect we have seen the low, but that doesn’t mean we won’t have a retest of that low. I think I will wait a bit before adding further to stock holdings.

 

RECENT STOCK PURCHASES

-SSO. (2x S&P 500 ETF) I will sell my SSO position when I think the rally is over. This is a true trading position. Other recent purchases may or may not be long-term holds – just depends on market action and indicators.

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too.

-Apple. China is returning. #1 in momentum before the crisis.

-Intel. Low PE; good story (laptops are in demand for working at home); good momentum before the crisis.  

-XLK. Technology ETF; spreads some risk and gives exposure to Microsoft, Cisco, etc.

-Starbucks. China is returning and they should do better than most in earnings here in the US.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +5**   

Most Recent Day with a value other than Zero: +5 on 26 March. (Non-Crash Sentiment is bullish; Breadth has made a bullish divergence from the S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low Logic Indicator is bullish; and Smart Money {late-day-action} is oversold.)

(1) +10 Max Bullish / -10 Max Bearish)

(2) -4 or below is a Sell sign. +4 or higher is a Buy Sign.

 

**The Top/Bottom indicator continues to give extreme oversold readings, but as I have been saying, we won’t know when we have a bottom until we have a successful retest, or a reversal buy-signal from Breadth or Volume.

 

MOMENTUM ANALYSIS:

CAUTION: Momentum is not a good tool during market declines.

 

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%; in this case, -100% because the market has been so bad. The rest are then ranked based on their momentum relative to the leading ETF.  The highest ranked are those closest to zero. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%, rather minus 100% since the market has been bad. The rest are then ranked based on their momentum relative to the leading stock. The highest ranked are those closest to zero.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved to POSITIVE 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 50% invested in stocks. (I previously dropped stock allocations to 45% on 27 January and lower a few days after the decline started.) You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Thursday, the BREADTH-THRUST, VOLUME & NON-CRASH SENTIMENT indicators are bullish; the VIX indicator gave a bear signal. The PRICE indicator is Neutral.  The Long-Term Indicator IMPROVED to BUY.  I’ve been increasing stock holdings so I am not planning to act on the BUY signal. I am already at 50%-stocks. If we do retrace down, I’ll try to find a good buy-point.  At that time, I’ll increase stock holdings significantly.