My 2xS&P 500 trade blew up on me. The odds were
60%-40% in my favor. I got the 40% - it happens.
ISM COVID-19 IMPACTS ON SUPPLY CHAIN (ISM)
“Today [11 March] the Institute for Supply Management® (ISM®)
revealed the first-round results of a survey focused on coronavirus disease
2019 (COVID-19) business and supply chain impacts. Notably, nearly 75 percent
of companies report supply chain disruptions in some capacity due to
coronavirus-related transportation restrictions, and more than 80 percent
believe that their organization will experience some impact because of COVID-19
disruptions. Of those, one in six (16%) companies report adjusting revenue
targets downward an average of 5.6 percent due to the coronavirus.” Press
release at…
JOBLESS CLAIMS (MarketWatch)
“The number of Americans who applied for unemployment
benefits in early March fell slightly and remained near a 50-year low,
indicating the coronavirus has not caused an influx of layoffs so far.
Initial jobless claims dropped 4,000 to 211,000 in the
seven days ended March 7…” Story at…
PRODUCER PRICE INDEX (CNBC)
“U.S. producer prices fell by the most in five years in
February, pulled down by declines in the costs of goods such as gasoline and
services.
The Labor Department said on Thursday its producer price
index for final demand dropped 0.6% last month…” Story at…
BULL MARKET WILL SOON END (MarketWatch)
“The longest bull market in U.S. history will soon run
out of road as the global COVID-19 outbreak weighs on corporate earnings, which
are likely to “collapse” in the second and third quarters before rebounding,
the top equity strategist at Goldman Sachs warned in a Wednesday note…Kostin
put a midyear target for the S&P 500 SPX, -4.88% at 2,450, around 15% below Tuesday’s
close and 28% below the all-time closing high set on Feb. 19. A bear market is
widely defined as a pullback of 20% from a recent peak.” Story at…
FIRST LAYOFFS ARE HERE (msn.com)
“…layoffs indicate the coronavirus is triggering a rapid
turnaround in an American economy that weeks ago looked strong, with unemployment
at a half-century low. At the Port of
Los Angeles, 145 drivers have been laid off and others have been sent home without
pay as massive ships from China stopped arriving and work dried up…Christie
Lites, a stage-lighting company in Orlando, laid off more than 100 of its 500
workers nationwide this past week and likely will lay off 150 more, according
to chief executive Huntly Christie. Meanwhile a hotel in Seattle is closing an
entire department, a former employee said, and as many as 50 people lost their
jobs after the South by Southwest festival in Austin got canceled.” Story at…
MY COVID19 STORY (NavigatetheStockMarketblog)
My daughter is a nurse in a big-city hospital in central
Virginia. Today, her hospital discharged triaged 5 corona virus patients who are not
being counted in the statistics. Why? The don’t have testing kits for the virus. The patients were diagnosed by elimination;
they don’t have colds; they tested negative for Flu and Flu A; and all 5 had
traveled in Europe recently. Fortunately, none were sick enough to be admitted.
Her take: This is much worse than is currently understood. Take all recommended
precautions!
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell
about 9.5% to 2481.
-VIX rose about 40% to 75.47.
-The yield on the 10-year
Treasury slipped to 0.794.
Support levels:
Like many, I have been surprised at the depth of this correction.
We broke 2600, next stop 2350 at the December 2018 lows. If that doesn’t hold,
it’s a long way to 2100.
There’s an old adage on Wall Street – “Never on Friday.” I am reminded of a comment by Jeffrey Saut,
Raymond James for Chief Strategist. He talked about a “selling stampede” that
tends to last 17 – 25 sessions, with only 1.5- to three-day pauses/throwback
rallies, before they exhaust themselves on the downside. He also noted, “Never
on a Friday.” The reference was that once the markets get into one of these
weekly downside skeins, they rarely bottom on a Friday. No, they typically give
participants over the weekend to brood about their losses and then they show up
the next Monday in “sell mode” leading to Turning Tuesday.
Today is day 16 of the current selling stampede so the
timing is right for an end soon.
Overall volume was higher than any during this
correction. Unchanged volume was very low as seemingly, every investor decided
to sell “en masse.” I couldn’t find a lower unchanged volume less than today’s
value going back about 5-years. Sorry, but I don’t have the data going back to
the crashes of 2001 and 2007.
We saw another 90% down-volume day. This is the sixth
one in less than 3 weeks. As Lowry Research noted, “…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 and, in the process, produce a
90% Upside Day.” - Lowry Research.
Overall, the daily sum of 20 Indicators declined from
-10 to -11 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from -104 to
-101. (These numbers sometimes change after I post the blog based on data that
comes in late.) Most of these indicators are short-term. We continue to see
some improvement; but not enough to make a difference!
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 16 and the S&P
500 is now 26.7% below its all-time top, on 19 Feb. It is 18.7% below its
200-dMA.
No bottom is indicated, but perhaps it won’t be much
longer.
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 11
March. (The S&P 500 Index is too far below the 200-dMA when sentiment is
included; Bollinger Bands and RSI are oversold; Breadth has made a bullish
divergence from the S&P 500; Money Trend has made a bullish divergence from
the Index; 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…
THURSDAY 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
Thursday, the VOLUME and VIX gave bear signals; The
SENTIMENT and PRICE Indicators were neutral. The Long-Term Indicator remained SELL. The important
sell signal was 24 February and I sold before that due to other signals.
