Jobless Claims … Stock Market Analysis… Coronavirus (COVID-19) … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

JOBLESS CLAIMS (MarketWatch)

“Some 3.8 million American workers who just lost their jobs applied last week for unemployment benefits, bringing a record number of layoffs during the coronavirus crisis to about 30 million in a month and a half.”  Story at…

https://www.marketwatch.com/story/us-jobless-claims-climb-38-million-in-late-april-to-push-coronavirus-total-to-30-million-2020-04-30

 

PERSONAL SPENDING / PCE PRICES (Bloomberg)

“U.S. personal spending plummeted in March by the most on record as widespread shutdowns and job losses from the Covid-19 pandemic wreaked havoc on the economy’s main engine -- consumers…. The broader personal consumption expenditures price gauge, which the Fed officially targets for 2% inflation, rose 1.3% from a year earlier.” Story at…

https://www.bloomberg.com/news/articles/2020-04-30/u-s-personal-spending-plummeted-by-a-record-7-5-in-march

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5:30 PM. Nationwide, there were about 32,000 new-cases today, about 8,000 more than yesterday. The 5-day growth-rate was 0.97, i.e., average new cases are falling at a rate of 3% per day. It’s headed in the right direction for a change.

 

These numbers are based on U.S. totals; local data will be different.

 

MARKET REPORT / ANALYSIS         

-Thursday the S&P 500 dipped about 0.9% to 2912.

-VIX rose about 9% to 34.15.

-The yield on the 10-year Treasury rose to 0.644.

 

Based on past history, a “V” bottom is rare.  For a huge drop like the 34% decline we recently experienced, a “V,” flash-crash, down-and-back seems impossible especially given the economic backdrop.  It may be, but my long-term indicator flashed BUY 4 days ago and I need to respect that signal.  At present, I have not been trading what I see; I have been trading what I think.  I think the market should fall back and retest the lows.  But what I see is a collection of indicators that are very bullish.  Even the Breadth MACD that looked like it might turn bearish, now looks OK. So, I am bumping my stock allocation higher.

 

I bought Microsoft today to get stock holdings to 45%. It’s #1 in my momentum analysis and they reported great earnings.  Covid-19 didn’t hurt their business.

 

The S&P 500 closed on its lower trend line today. We’ll need to see if it drops lower as that would be an obvious bear-sign that perhaps the rally was ending. The Index is currently 3.1% below its 200-dMA. Resistance points are shown below.

 

We could still be at a top, regardless of what the indicators say, but I plan to increase my stock allocation. I’ll try and post before I do.

 

RESISTANCE:

61.8% Fibonacci Retracement: 2950

200-dMA: about 3025

Resolution of Bearish Ascending Wedge: About 3200

The Prior all-time High: 3386

 

Wednesday’s closing S&P 500 level of 2940 represented a retracement of 61% from the prior low back toward the all-time high. 57% retracement (2890) is the average for this type of rally; 52% is the median. The rally has lasted 26 days; the average length of a counter-trend rally after a 15% waterfall decline is 21 days.  The median is 11 days.

 

The Index is currently down 14% from its all-time high. Today is day 50 of the correction. Corrections greater than 10% last (on average) 68 days, top to bottom. Crashes are significantly longer; I am not sure if this is a crash yet. I’ll be surprised if this is over in 3-weeks.

 

Overall, the daily sum of 20 Indicators dipped from +13 to +10 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from +52 to +56. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I think we go higher. Most indicators remain bullish.

 

RECENT STOCK PURCHASES

Of purchases near the recent low, I still own:

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too. Gilead is the largest holding in the IBB-ETF. 

 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum in the ETFs I track before the crisis.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +2**   

Most Recent Day with a value other than Zero: +2 on 30 April. (Non-Crash Sentiment is bullish; Breadth is diverging from the S&P 500 in a bullish direction; New-hi/new-low data is bullish; and Smart Money is overbought, so it is -1.)

(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 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:

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained BULLISH 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. You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Thursday, the VOLUME, SENTIMENT & PRICE indicators are bullish; VIX was bearish.

 

The 5-10-20 Timer System remained bullish, because the 5-dEMA and the 10-dEMA climbed above the 20-dEMA. This is a good indicator on its own.

 

The long-term indicator dipped to HOLD.

FOMC Rate Decision … GDP-ADV … EIA Crude Oil Inventories … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

FOMC-RATE DECISION (MarketWatch)

“U.S. stocks surged back to near session highs Wednesday afternoon, after Federal Reserve Chairman Jerome Powell vowed to mount a robust and protracted fight to offset fallout from the coronavirus pandemic which he said “will weigh heavily” on economic activity, employment and inflation in the near term.” Story at…

https://www.marketwatch.com/story/stock-index-futures-point-higher-ahead-of-fed-decision-as-investors-track-earnings-2020-04-29

 

GDP- ADV (Financial Times)

“The US economy shrank in the first quarter by its fastest rate since the 2008 financial crisis, ending the longest expansion on record…Gross domestic product, or the value of all goods and services produced by the economy, shrank at an 4.8 per cent annualized rate in the first three months of the year…” Story at…

https://www.ft.com/content/06493320-083a-4a7d-94cc-8db581f9ed03

 

EIA CRUDE INVENTORIES (Energy Information Administration)

“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 9.0 million barrels from the previous week. At 527.6 million barrels, U.S. crude oil inventories are about 10% above the five-year average for this time of year.” Press available at…

https://www.eia.gov/petroleum/supply/weekly/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5 PM Wednesday. Nationwide, there were about 24,000 new-cases today, about the same as yesterday. The 5-day growth-rate was 1.02, i.e., average new cases are rising at a rate of 2% per day. As the curve below shows, there isn’t much flattening of total cases – the curve is basically straight for all of April.

 

These numbers are based on U.S. totals; local data will be different.

 

MARKET REPORT / ANALYSIS         

-Wednesday the S&P 500 rose about 2.7% to 2940.

-VIX fell about 7% to 31.23.

-The yield on the 10-year Treasury rose to 0.628.

 

The next level of resistance was the 61.8% Fibonacci level at 2950. We cleared the 50-dMA a few days ago and today we touched the 62% Fibonacci retracement level and retreated a little at the close.  Resistance points are shown below.

 

RESISTANCE:

61.8% Fibonacci Retracement: 2950

200-dMA: about 3025

Resolution of Bearish Ascending Wedge: About 3200

 

We’ve seen 3-days with very high up-volume.  Over the last 3 days up-volume has been 82%, 78% and 84%.  This is a very bullish sign. Sentiment is still overly bearish so, at this point, it looks like the markets can go higher.  It is even possible that the S&P 500 will make it back to the old highs.  At that point, lingering issues are likely to bring on a second significant dip.

 
Wednesday’s closing S&P 500 level of 2940 represented a retracement of 61% from the prior low back toward the all-time high. 57% retracement (2890) is the average for this type of rally; 52% is the median. The rally has lasted 26 days; the average length of a counter-trend rally after a 15% waterfall decline is 21 days.  The median is 11 days.

  

The Index is currently down 13.2% from its all-time high. Today is day 49 of the correction. Corrections greater than 10% last (on average) 68 days, top to bottom. Crashes are significantly longer; I am not sure if this is a crash yet. I’ll be surprised if this is over in a month.

 

Overall, the daily sum of 20 Indicators improved from +6 to +13 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from +43 to +52. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I think we go higher, although a down-day would be the norm for Thursday given the big up-day today.

 

RECENT STOCK PURCHASES

Of purchases near the recent low, I still own:

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too. Gilead is the largest holding in the IBB-ETF. 

 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum in the ETFs I track before the crisis.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +2**   

Most Recent Day with a value other than Zero: +2 on 29 April. (Non-Crash Sentiment is bullish; Breadth is diverging from the S&P 500 in a bullish direction; New-hi/new-low data is bullish; and Smart Money is overbought, so it is -1.)

(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 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:

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

WEDNESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained BULLISH 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. You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Wednesday, the VOLUME, VIX, SENTIMENT & PRICE indicators are bullish.

 

The 5-10-20 Timer System remained bullish, because the 5-dEMA and the 10-dEMA climbed above the 20-dEMA. This is a good indicator on its own.

 

The long-term indicator improved to BUY, a repeat of 2-days ago.

 

Consumer Confidence … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

CONSUMER CONFIDENCE (Conference Board)

“The Conference Board Consumer Confidence Index® deteriorated further in April, following a sharp decline in March. The Index now stands at 86.9 (1985=100), down from 118.8 in March…“Consumer confidence weakened significantly in April, driven by a severe deterioration in current conditions,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis. Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold. The uncertainty of the economic effects of COVID-19 will likely cause expectations to fluctuate in the months ahead.” Press release at…

https://www.conference-board.org/data/consumerconfidence.cfm

 

DANGEROUS RALLY (Seeking Alpha)

“Leadership in this rally stinks. Valuations are approaching levels in some cases where they triggered the decline. And while the market does predict the economy six months to a year or more out, in this case it seems to me the market is predicting a far better outcome in that time frame than I think is realistic. So economic exuberance, narrow leadership, narrower breadth (no followers of the leaders) and valuations approaching old highs. What could possibly go wrong?” Commentary at…

https://seekingalpha.com/article/4340363-this-is-one-dangerous-rally?utm_source=push&utm_medium=onesignal&utm_campaign=28-04-20-article

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 7 PM Tuesday. Nationwide, there were about 5300 more new-cases than yesterday. The 4-day growth-rate was 1.03, i.e., average new cases are rising at a rate of 3% per day. As the curve below shows, there isn’t much flattening of total cases – the curve is basically straight for all of April.

 

These numbers are based on U.S. totals; local data will be different.

 

MARKET REPORT / ANALYSIS         

-Tuesday the S&P 500 rose about 1.5% to 2863.

-VIX rose about 0.8% to 33.57.

-The yield on the 10-year Treasury slipped to 0.615.

 

I did bump my % of stocks up to 40% today, even as my long-term indicator dropped from BUY to HOLD.

 

Today my VIX indicator switched to SELL and the Volume indicator switched to neutral.  That was a surprise and it pushed the long-term indicator to HOLD. My indicators are designed to identify conditions at tops and bottoms so today’s move doesn’t mean a lot.

 

One may ask, “Why didn’t the NTMS indicator identify the bottom of 2237 on 23 March?”  Fair question. It seems that VIX reached an extreme high value (>50) and it was slow to fall fast enough to give us a buy signal until a month after the initial bottom. This may or may not be a good thing. If there is a retest of the low, the VIX Indicator may be right. For example, let’s consider the 2008-2009 Financial crash.

 

There was a preliminary bottom on 27 Oct. My VIX indicator did not switch to BUY until 8-weeks after that bottom. However, it called the final bear-market bottom on 11 March 2009, 2 days after the final bottom.

 

Bottom line, my VIX indicator is either really good or not so good depending on how long the correction lasts, therefore, I’ve been trying to improve it.

 

I spent about 30-hours recently going over the VIX indicator looking for improvements.  I finally gave up, but I realized after going thru the process the simplest solution would be to zero-out the VIX indicator when VIX reaches extreme values.  Had this rule been in effect for this correction the NTSM buy would have been 3-days after the bottom. This would give us the opportunity to play the first bounce with more confidence.

 

On the whole, during corrections, my system lives for lower-lows so we can decide if it is time to buy as lows are re-tested.   

 

The S&P 500 remained above its 50-dMA, and closed 2.7% above it for the second day in a row so the 50-d resistance level has been successfully breached.

 

Monday’s S&P 500 level of 2878 represented a retracement of 56% from the prior low back toward the all-time high. 57% retracement (2890) is the average for this type of rally; 52% is the median. The rally has lasted 24 days; the average length of a counter-trend rally after a 15% waterfall decline is 21 days.  The median is 11 days. I thought the rally was over, but today proved otherwise.

 

The Index is currently down 15.5% from its all-time high. Today is day 48 of the correction. Corrections greater than 10% last (on average) 68 days, top to bottom. Crashes are significantly longer; I am not sure if this is a crash yet. I’ll be surprised if this is over in a month.

 

Overall, the daily sum of 20 Indicators slipped from +7 to +6 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations slipped from +44 to +43. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

I bumped stock holdings up to 40% of my total portfolio today, only to watch the Index close below yesterday’s level in an afternoon selloff. Internals were good Tuesday so it may be OK.

As I noted in my earlier post today, 3200 may be the best we can hope for as a high. I think the problems the economy faces are worse than investors realize and the Index will reverse and trend lower. Whether we’ll see a retest of the low remains to be seen.

 

RECENT STOCK PURCHASES

Of purchases near the recent low, I still own:

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too. Gilead is the largest holding in the IBB-ETF. 

 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum in the ETFs I track before the crisis.

 

TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a neutral reading.)

Today’s Reading: +2**   

Most Recent Day with a value other than Zero: +2 on 28 April. (Non-Crash Sentiment is bullish; Breadth is diverging from the S&P 500 in a bullish direction; Late-day action is diverging in a bullish manner form the S&P 500; and Smart Money is overbought so it is -1.)

(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 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:

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved to BULLILSH 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. You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Tuesday, the SENTIMENT & PRICE indicators are bullish; VOLUME is neutral; the VIX indicator bearish.

 

The 5-10-20 Timer System remained bullish, because the 5-dEMA and the 10-dEMA climbed above the 20-dEMA. This is a good indicator on its own.

 

The long-term indicator declined to HOLD.

Questions Remain on Buying this Rally

The market action today hasn’t instilled much confidence that this is a good time to get in. Still, market internals are very positive. Of the Dow 30 and ETF’s I track, Consumer Discretionary (XLY) or Materials (XLB) seem like a reasonable choices. AAPL and INTC are too, but I need to wait longer to avoid the “wash-sale rule.” (The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so.)

 

We now have another bearish rising-wedge on the S&P 500 chart. The apex of this one suggests the pattern would resolve on or before 3200; but it could get to the apex (like the last one), i.e., 3200 is the current max target for the Index.

 

I will increase to 40% invested in stocks. Can’t say that I am confident in buying now.

Peter Zeihan on the Economy (excerpt) … Paul Schatz Commentary (excerpt) … Millions Make More on Unemployment … Coronavirus (COVID-19) … Stock Market Analysis… ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“We’re only down 15% from the all-time high of February 19, and it seems to me that the world is more than 15% screwed up.” – Howard Marks, April 20, 2020.

 

OIL GIANT FILES FOR BANKRUPTCY

“Diamond Offshore Drilling has filed for Chapter 11 bankruptcy protection, becoming the second major victim of the oil market crash so far, after Whiting Petroleum filed earlier this month…Earlier this month, Rystad Energy warned that as many as 533 U.S. oil companies go bankrupt if oil stays at around $20 a barrel.” Story at…

https://oilprice.com/Latest-Energy-News/World-News/10-Oil-Forces-US-Drilling-Giant-To-File-For-Bankruptcy.html

 

EARNINGS (FactSet)

“The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the first quarter is -15.8%, which is larger than the earnings decline of -14.8% last week. Negative earnings surprises reported by companies in the Financials sector were mainly responsible for the increase in the overall earnings decline during the week. If -15.8% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings for the index since Q2 2009 (-26.9%). It will also mark the fourth time in the past five quarters in which the index has reported a year-over-year decline in earnings.” Analysis at… 

https://insight.factset.com/sp-500-earnings-season-update-april-24-2020

 

PETER ZEIHAN ON ECONOMY ET AL. (Financial Sense)

“When we kind of peek out from under our rocks and stop the stay at home orders, you'll have the virus start to pop up in additional cities. Then you'll get outbreaks in Denver or in New York or in Boston—it won't be nationwide. When that happens, those cities will have to lock back down. That means we're looking at probably a third to half of the workforce at any given time under some degree of restriction, and probably 10 to 20% of the population and under some degree of lockdown. Under normal circumstances, that would cause a recession. So, we're not going to get back to where we were in February anytime soon, until we have a vaccine.” - Peter Zeihan,  geopolitical strategist, President, Zeihan on Geopolitics. Story at…

https://www.financialsense.com/blog/19578/peter-zeihan-china-coronavirus-recovery-and-economic-impact-second-wave

 

PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)

“Over the coming days the bulls need to keep going and close above last week’s high which is 24,300 in the Dow and 2880 in the S&P 500. Without doing that, there is downside risk to 22,500 and 2640 respectively.” – Paul Schatz, President Heritage Capital.

http://investfortomorrowblog.com/archives/4910

 

MILLIONS MAKING MORE ON UNEMPLOYMENT AND DON’T WANT TO WORK (ZeroHedge)

“…for the next several months, unemployed workers all over America will be bringing home at least the equivalent of $15 an hour based on a 40 hour work week…Some Republican lawmakers warned about this unintended consequence of the relief bill when it was being drafted, noting that $600 a week amounts to $15 an hour, more than twice the federal minimum wage. That’s in addition to state unemployment benefits, which vary widely, from a maximum of $235 per week in Mississippi to $795 per week in Massachusetts…According to a report by the Leadership Conference Fund and the Georgetown Center on Poverty and Inequality, 42.4% of people working in the United States in 2015 earned less than $15 an hour. So how is the economy supposed to “get back to normal” if more than 40 percent of our workers would be better off unemployed?

 

“…the most shocking outcomes of the Coronavirus Pandemic – and especially of the Coronavirus Aid, Relief, and Economic Security Act (CARES) – is that the very people we hired have now asked us to be laid off. Not because they did not like their jobs or because they did not want to work, but because it would cost them literally hundreds of dollars per week to be employed. It is the nail in the coffin of a Main Street business…” – Owner of Sky Marietta Coffee Shop, Harlan, Kentucky. Commentary at…

https://www.zerohedge.com/personal-finance/millions-now-unemployed-americans-are-making-more-money-they-did-when-working

 

SOME GOOD ADVICE (Hussman Funds)

“One bit of advice that friends have often found helpful: Anytime you make a portfolio change, start by accepting that you are guaranteed to have regret. If you sell some of your holdings and the market goes up, you’ll regret having sold anything. If you sell and the market goes down, you’ll regret not having sold more. If you don’t sell and the market goes up, you’ll regret not having bought. The key is to balance a careful consideration of valuations, expected returns, potential risks, and prevailing market conditions, along with all of those potential regrets. If you begin by accepting that there will be regret of one form or another, you won’t feel paralyzed, and you’ll consider more possibilities than you might otherwise.” – John Hussman,  PhD. Commentary at…

https://www.hussmanfunds.com/comment/mc200326/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5 PM Monday. The U.S. numbers continue to bounce around. Over the weekend there were 79000 new cases (almost 40,000 per day) and the 5-day growth-rate stayed stubbornly above 10% per day.  Today, there were about 12,000 fewer cases than yesterday, but including numbers from the weekend, today’s 5-day growth-rate increased to 1.14. The average new cases are rising at a rate of 14% per day over the previous 5-days.

 

What am I missing? The US numbers are going up, but this isn’t being mentioned on news. As the curve below shows, there isn’t much flattening either.

 

When I mentioned to my ER Nurse daughter that numbers seemed to be going the wrong way (more cases), she said it’s because there are now plenty of test kits.  Hospitals are testing more and finding more virus. This is also expanding the understanding of Coronavirus symptoms.  She said the virus is causing seizures in people the medical establishment would not have guessed had coronavirus.

 

These numbers are based on U.S. totals; local data will be different.

 

MARKET REPORT / ANALYSIS         

-Monday the S&P 500 rose about 1.5% to 2878.

-VIX dropped about 7% to 33.29.

-The yield on the 10-year Treasury rose to 0.664.

 

Today the my VIX indicator switched to Buy.  It has been preventing me from buying, so long-term indicators are now bullish. VIX is one of the better indicators and it is over weighted in my analysis. Since we are close to the prior rally top, I plan to wait and see if the Index can close above today’s high (2878) before I move money back into the stock market.

 

The S&P 500 climbed above its 50-dMA, and closed 2.9% above it. The Index has decisively broken above its 50-dMA and it closed slightly above its prior rally high of 2875.

 

Today’s S&P 500 level of 2878 represented a retracement of 56% from the prior low back toward the all-time high. 57% retracement (2890) is the average for this type of rally; 52% is the median. The rally has lasted 24 days; the average length of a counter-trend rally after a 15% waterfall decline is 21 days.  The median is 11 days. I thought the rally was over, but today proved otherwise.

 

The Index is currently down 15% from its all-time high. Today is day 47 of the correction. Corrections greater than 10% last (on average) 68 days, top to bottom. Crashes are significantly longer; I am not sure if this is a crash yet. 

 

Overall, the daily sum of 20 Indicators improved from +1 to +7 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations improved from +42 to +44. (These numbers sometimes change after I post the blog based on data that comes in late.) Most of these indicators are short-term.

 

Long-term indicators are now bullish, since the VIX indicator finally switched to buy.

 

Given that the long-term indicator is now bullish, I am going to add to stock holdings IF it is apparent that the index will close higher Tuesday. I am still not confident, but I will hold my nose and follow the indicators as long as the market is agreeable.  It will be necessary to remain nimble, since I think the best we can expect, is a return to the old highs before we see weakness that will take the markets down again. I think the problems the economy faces are worse than investors realize.

 

I will move to 40%-50% invested in stocks tomorrow, IF it is apparent that the S&P 500 will close higher. We have to consider that this could still be the top, or near the top, of the rally. If we have a huge up-day tomorrow, it might indicate a top so I'll be leery of jumping back in.

 

RECENT STOCK PURCHASES

Of purchases near the recent low, I still own:

-Biotech ETF (IBB). #1 in momentum. We’re in a health crisis so perhaps this will be a good longer-term hold too. Gilead is the largest holding in the IBB-ETF. 

 

-XLK. Technology ETF spreads some risk and gives exposure to Microsoft, Cisco, etc.; was #1 in momentum in the ETFs I track before the crisis.

 

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 27 April. (Non-Crash Sentiment is bullish; Breadth is diverging from the S&P 500 in a bullish direction; and Smart Money is overbought so it is -1.)

(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 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:

TODAY’S RANKING OF  15 ETFs (Ranked Daily)

The top ranked ETF receives 100%. 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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

MONDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved 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 35% invested in stocks. You may wish to have a higher or lower % invested in stocks depending on your risk tolerance.

 

INTERMEDIATE / LONG-TERM INDICATOR

Monday, the VOLUME, PRICE, VIX and NON-CRASH SENTIMENT indicators are bullish.

 

The 5-10-20 Timer System remained bullish, because the 5-dEMA and the 10-dEMA climbed above the 20-dEMA. This is a good indicator on its own.

 

The long-term indicator improved to BUY.

 

Still, there is risk since we may be at, or near, the rally top.