“Bottom fishing is still the most expensive sport in the
world.” Scott Minerd, Guggenheim Global Chief Investment Officer.
"This imaginary person out there - Mr. Market - he's
kind of a drunken psycho. Some days he gets very enthused, some days he gets
very depressed. And when he gets really enthused, you sell to him and if he
gets depressed you buy from him. There's no moral taint attached to that."
- Warren
Buffett
EXPERT OPINIONS
I am a stock market junkie – not a professional.
Therefore, I listen to the experts in an effort to learn and stay agile. Here’s
what some experts are saying:
-Sentiment Trader. “For the past 3 sessions,
[Monday-Wednesday, last week] a minimum of 80% of NYSE issues have advanced and
80% of the volume went into those issues. That’s happened twice before in the
past 80 years. The 1st kicked
off the mid-80’s bull market. The 2nd
kicked off the 2009 bull market.”
-Ed Yardeni, Yardeni Research: “The bottom is in; don’t
fight the FED.” (paraphrased from CNCB, Tuesday.)
-Josh Brown, CEO of New York City-based Ritholtz Wealth
Management. “I do not think the market can bottom until the virus tops.”
-Carter Worth, Chief Market Technician at Cornerstone
Macro. Consensus now, almost Streetwide, is that we’ve put in an important low.
There is even talk that we’ve entered a new Bull Mkt. Whether or not this new
found enthusiasm is proved right/hopelessly misguided, the [evidence shows that
the]…days/wks/mths ahead are not likely to be rewarding.”
-Chris Ciovacco, Ciovacco Asst Management. “The evidence we have in hand right now does
not point to a bottom already being in place as a high probability event.”
However; Chris Ciovacco is very clear that one should be
open to ALL possibilities. He has written that last Monday might have been a
bottom, but there were a couple of issues that are concerning. In a correction, the first RSI drop below 30
does not usually indicate the final bottom and that is what we saw Monday. In
addition, the VIX 52-week avg needs to be falling and it isn’t. He discussed
these issues and the Breadth Thrust in detail. See his presentation on Youtube at…
SUGGESTING A MARKET BOTTOM (MarketWatch)
“…uncertainties aside, there are several indicators that
bolster the case that a recovery for the stock market may have begun, said
Michael Arone, chief investment strategist at State Street Global Advisors. “The
severe indiscriminate selling we saw prior to last week has abated,” he said,
noting that through last Monday, nearly every asset class, including gold, U.S.
Treasury bonds and stocks were being sold off. “It was that classic
capitulation move to cash,” whereas in more recent sessions, bonds have rallied
when stocks retreated and vice-versa, typical of normal behavior in financial
markets. Another potential sign of a market bottom is action in currency
markets, where the U.S.
dollar has lost value in recent sessions after the Federal
Reserve made aggressive moves to lower the cost of borrowing dollars and
increase liquidity.” Story at…
My cmt: Most experts agree that a “retest is possible if
not likely.”
CORONAVIRUS (COVID19)
I am now projecting future virus totals based on a 10-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 159,184 cases
in the US at about 6 PM this afternoon. At current growth rates, we should hit
about a half-million cases in one week. There’s a lot of variability in the
data, so the projections bounce a lot; projections are for exponential growth
and small changes are amplified. Obviously, the numbers will depend on social distancing.
Worldwide, the growth factor is very close to 1, i.e.,
exponential growth may be nearly over and total cases would be expected to max
out at about double current values. That’s true for the world, but the US is
not there yet.
On a 10-day average, our new-cases are about 18% higher
than yesterday. That still means that the number of cases are likely to double
in about 4 days.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 3.4% to 2627.
-VIX dropped about 13% to 57.08.
-The yield on the 10-year
Treasury rose to 0.723.
Today, there was another Breadth Thrust signal confirming
that the bulls are in full stampede mode.
There was also a bearish, “Death Cross,” because the
50-dMA dropped below the 200-dMA. My thought on the Death Cross is, “So what?”
It’s meaningless at this point, but maybe some will sell because of the scary
name.
The Index is currently down 22.4% from its all-time high
and the rally has retraced 34% of the drop.
The first Fibonacci retracement level would be 38%, with additional
levels at 50% and 62% (for those who believe in Fibonacci numbers – I am not
convinced).
We expect this rally to retrace 50% or more of the
decline based on prior rallies following waterfall declines of 15% or more. My
gut feeling is that since this decline occurred so quickly, this rally may
actually go farther. We’ll see. While there are estimates that GDP will fall to
levels unimaginable a few months ago, one wonders whether restaurants, movies,
etc. will all be back in business in June.
The market is looking ahead and past the coming disastrous
numbers. To me it still is just guesswork whether or not we’ll have a retest of
the low.
Overall, the daily sum of 20 Indicators improved
from +5 to +9 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from -35 to -16.
(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 or that the market can’t take
prices lower. I will wait for a retest before adding further to stock holdings
and I still might take profits on the ongoing rally if I get worried.
RECENT STOCK PURCHASES - I plan to set Stop orders to try
to protect recent purchases from extreme losses if this market turns down.
-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: +5**
Most Recent Day with a value other than Zero: +5 on 30
March. (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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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
Monday, the New-High/New-Low, VOLUME and NON-CRASH
SENTIMENT indicators are bullish and the was a bullish Breadth Thrust; the VIX indicator
gave a bear signal. The and PRICE indicator is Neutral.
The
Long-Term Indicator IMPROVED TO BUY. 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.
