PCE PRICES (Reuters)
"Consumer prices as measured by the personal consumption
expenditures (PCE) price index edged up 0.1% in January.” Story at…
PERSONAL SPENDING (CNBC)
“U.S. consumer spending rose moderately in February and
momentum is set to fade rapidly in the coming months.” Story at…
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…
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…
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…
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.
