“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
FED BEIGE BOOK (Federal Reserve)
“Economic activity expanded at a modest to moderate rate
over the past several weeks, according to the majority of Federal Reserve
Districts…Consumer spending generally picked up, but growth was uneven across
the nation, including mixed reports of auto sales…There were indications that
the coronavirus was negatively impacting travel and tourism in the U.S.
Manufacturing activity expanded in most parts of the country; however, some
supply chain delays were reported as a result of the coronavirus and several
Districts said that producers feared further disruptions in the coming weeks.”
Press release at…
ADP EMPLOYMENT (PRNewsWire)
“Private sector employment increased by 183,000 jobs from
January to February according to the February ADP National Employment Report®.” Press release at…
ISM MANUFACTURING (MarketWatch)
“Most U.S. manufacturers said business began to slow to a
crawl in February as supply bottlenecks tied to the coronavirus impaired their
ability to get parts, a survey of executives found. The Institute for Supply
Management said its manufacturing index dipped to 50.1% last month from
50.9%.” Story at…
EIA CRUDE OIL INVENTORIES (Street Insider)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 800 thousand barrels from the
previous week. At 444.1 million barrels, U.S. crude oil inventories are about
4% below the five year average for this time of year.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 4.2% to 3130.
-VIX fell about 13% to 31.99.
-The yield on the 10-year Treasury rose to 1.062. (I was surprised
to see the 10-yr below 1% while the stock markets were screaming higher.)
Don’t fight the FED? Perhaps, but huge, snap-back rallies,
like today, are not unusual and do not necessarily mean the correction is over.
As of Wednesday, the S&P 500 has retraced 41% from the bottom. A 50% retracement (more or less) is about the
norm, so today’s bounce is not telling us the correction is over – it could be;
we might go straight up from here – but it is not likely.
We did see high up-volume today. If tomorrow is another day like today, volume
wise, that would be very bullish. I don’t expect it, but we’ll see.
My current expectation is that the markets will retest
the lows. At that time, we’ll have a lot
more information about the market and should be able to make an informed
decision whether to get back in or stay out. That is probably more than a month
away.
The “average” correction has been 12% since 2009. In the
past 15 years or so, corrections greater than 10% have lasted 68 days top to
bottom.
We’re at day 10 and the S&P 500 is now 7.6% from its
all-time top, on 19 Feb. It is 2.6% above its 200-dMA.
Overall, the daily sum of 20 Indicators slipped
from -9 to -10 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations declined from -105
to -111. (These numbers sometimes change after I post the blog based on data
that comes in late.) Most of these indicators are short-term.
If investors really believed that the correction was
over, they wouldn’t still be buying Utilities over the S&P 500 Index. Utilities outpaced the Index today as they
have for a month. The chart below is configured such that a red-line below zero
indicates Utilities are outperforming the S&P 500 – that’s bearish.
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 4
March. (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.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
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.
For more details, see NTSM Page at…
WEDNESDAY 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
Wednesday, the VOLUME and VIX gave bear signals; The
SENTIMENT and PRICE Indicators were neutral. The Long-Term Indicator remained SELL.
