“Bottom fishing is still the most expensive sport in the
world.” Scott Minerd, Guggenheim Global Chief Investment Officer.
DURABLE ORDERS (MarketWatch)
“Orders for durable goods posted the biggest gain in
February since last summer, but aside from a spike in demand for autos, the
report also showed early signs of damage to the economy from the growing threat
of the coronavirus. Orders for durable goods jumped 1.2% last month…” Story at…
EIA CRUDE INVENTORIES (OilPrice.com)
“As the oil industry continues to struggle with oil price
shocks, the U.S. Energy Information Administration reported a
crude oil inventory build of 1.6 million barrels for the week to March 20.” Story
at…
https://oilprice.com/Energy/Energy-General/Oil-Price-Slide-Accelerates-On-Crude-Inventory-Build.html
WHERE WEVE BEEN (The Reformed Broker)
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 62,873 cases in the US at 6 PM this
afternoon. At current growth rates, we should hit about 100-thousand cases in
one week. That’s a much lower projection than we have seen.
It is starting to look like social distancing is working.
Today, the number of new cases was about 10% higher than yesterday. A week ago, the number of new cases was
double the previous day.
Worldwide, the growth factor has dropped below 1, i.e., exponential
growth may be over and total cases would be expected to max out at about double
current values.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 1.2% to 2476.
-VIX rose about 3.7% to 63.95.
(The options boys aren’t convinced we’ve made a bottom.)
-The yield on the 10-year
Treasury rose to 0.862.
I have the same problem as anyone who is attempting to
time this market – I lack experience. 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 am not going to write about indicators – I covered them
earlier today. We did not get the 90% up-volume day that was suggested at
mid-day.
Overall, the daily sum of 20 Indicators improved
from -1 to zero (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations improved from -76
to -66. (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 has retraced 27% of its decline. 50% is
about the max we might expect.
I will sell my SSO position when I think the rally is
over. Other recent purchases may or may not be long-term holds – just depends
on market action and indicators.
-Biotech ETF (IBB)
-Apple
-Intel
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 25
March. (The S&P 500 Index is too far below the 200-dMA when sentiment
is included; 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…
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…
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. 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. (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.
Wednesday, the PRICE & NON-CRASH SENTIMENT indicators
are bullish; the VOLUME & VIX indicators gave bear signals. The Long-Term Indicator remained
HOLD. The important sell signal was 24 February and I sold before
that due to other signals.
