“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
HOME SALES (USA Today)
“Sales of single-family homes, condos and co-ops were the
highest they'd been in 13 years, according to the National Association of
Realtors. Home purchases were also 6.5% higher than the previous month.” Story
at…
CORONAVIRUS (NTSMBlog)
There are currently 16,638 coronavirus cases in the
United States, an increase of 5,364 from yesterday. There is no point in
projecting the number of cases in 30-days – it’s basically the US population. At
the current growth rate, the US will surpass half-million cases in 7-days. If
20% of cases go into ICU, it will fill every ICU bed currently available. That’s
why we see Government requiring lockdowns and social distancing.
We need to see the growth-rate stabilize and drop. Measures
in place may slow the growth enough to avoid what may be a healthcare
emergency.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 fell about 4.3% to 2305.
-VIX dropped about 8% to 66.04.
(Very odd for options and the Index to disagree; with stocks down one would
expect VIX to be higher.)
-The yield on the 10-year
Treasury fell to 0.854.
So much for the bounce.
We made a new-low today and that is depressing. One new bit of good
-news is that the percentage of stocks advancing on the NYSE improved a lot today
even as the S&P 500 fell. I haven’t
given up on the possibility that a short-term end to selling may be close at
hand. We are back to “never-on-Friday” for
an end to selling. We may have to wait for a “turning-Tuesday” to see if markets
will turn up.
It’s Friday, so it’s time for a run-down of Bull/Bear
signs:
BEAR SIGNS
-Cyclical Industrials continue to underperform the
S&P 500 suggesting investors are worried.
-The 5-10-20 Timer is SELL, because the 5-dEMA and the
10-dEMA are below the 20-dEMA.
-Money Trend is headed down.
-VIX jumped sharply higher when the correction started
and is still giving a bearish signal.
-MACD of stocks advancing on the NYSE (breadth) made a
bearish crossover 21 Feb.
-MACD of S&P 500 price made a bearish crossover 21
Feb.
-New-high/new-low data is falling, but it is hinting at a
turn-around to the bull side.
-We’ve seen multiple 90% down-volume days during this
selloff. According to Lowry Research:
“…our 69-year record shows that declines containing two or more 90%
Downside Days usually persist, on a trend basis, until investors eventually
come rushing back in to snap up what they perceive to be the bargains of the
decade…” The rush back is signaled by a 90% up-volume day. Actually, we need to
see multiple 90% up-volume days in this major event.
-The smart money has peaked and is starting to turn down
NEUTRAL
-Statistically, the S&P 500 has been bearish due to
several panic-signals, but it is now in the Neutral category.
-The Fosback High-Low Logic Index is neutral, but it is very
close to giving a bull signal. It does seem to be a good “crisis”
indicator. It called the top of the 20% correction
in Sep-Dec 2018 to the day.
-Bollinger Bands and RSI are in neutral territory.
BULL SIGNS
-Sentiment (measured as %-Bulls [Bulls/{bulls+bears}]
based on the amounts invested in Rydex/Guggenheim mutual funds) is giving a buy
signal for a non-crash scenario. If the correction continues for a longer time,
I’ll need to revise my thinking on this indicator. In an extended decline, we’d
expect Sentiment to fall below 33%-bulls. It is now 61% bulls on a 5-day basis.
-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.
-Overbought/Oversold Index, a measure of advance-decline
data, is oversold. (This indicator isn’t followed much anymore.)
-Over the last 20 days, there have only been 6
up-days. That’s a bullish, oversold
sign.
-As of Friday, the size of up-moves has been larger than
the size of down-moves over the last month.
-XLU has been outperforming the S&P 500 index and it
still is; however, XLU is still gaining ground on the Index. My take is that
this indicator is now bullish based on its improvement. Here’s the chart I use
for this indicator. It is configured so that if the Spread of the S&P 500 minus XLU (red-line) is
rising, the S&P 500 (black-line) is outperforming the Utilities ETF-XLU.
Overall, the daily sum of 20 Indicators declined
from -7 to -9 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations dipped from -89 to -92.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
We made a new low today; we’ll have to keep waiting for that
bounce.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +4**
Most Recent Day with a value other than Zero: +4 on 20 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; 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.
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.
For more details, see NTSM Page at…
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. 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 40% invested in
stocks as of 3 March. (I previously dropped stock allocations to 45% on 27
January). You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Friday, the PRICE & NON-CRASH SENTIMENT indicators
are bullish; the VOLUME & VIX indicators gave bear signals. The Long-Term Indicator remained
to HOLD. The important sell signal was 24 February and I sold before
that due to other signals.
