CORONAVIRUS (NTSM)
The COVID19 Johns Hopkins website has been reporting lower
cases. In the U.S., there were 22,000 new cases today and 25,000 new cases yesterday.
The 5-day average growth rate remained below 1.0. This is the first time we
have seen 2 consecutive days below 1.0. i.e., new case numbers are falling. The
curve continues to slowly flatten; now with more confidence.
-Tuesday the S&P 500 rose about 3.1% to 2846.
-VIX dropped about 8% to 37.76.
-The yield on the 10-year Treasury dipped to 0.754.
As I first mentioned yesterday, the below chart shows a
clear, bearish, rising wedge-pattern since the recent bottom. (See yesterday’s blog if you want more
details on the chart pattern.) We also note that today’s close was exactly on
the upper trend line. Amazing how that
happens! Market manipulation? Computer algorithms? I don’t know, but the pattern
is set to break soon. If the chart guys
are right, the break will be down. We’ll see.
The Index is currently down 15.9% from its all-time high.
Today is day 38 of the correction. Corrections greater than 10% last (on
average) 68 days. Crashes are significantly longer; I am not sure if this is a
crash yet. It certainly has the
potential to be one.
Overall, the daily sum of 20 Indicators improved
from +5 to +7 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations slipped from +54 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.
Based on history, a retest of the low is still the most
likely outcome. Still, if the market continues much higher, I’ll need to
re-evaluate and increase stock holdings.
It is hard not to jump back in, but in addition to over-valued
stocks (and most probably are overvalued based on loss of earnings from the
crisis), there are still some important technicals that look bad. Money Trend
has turned down; the 40-dMA of new-highs is still falling; the S&P 500 chart
is bearish; and finally, the 50-dMA of Breadth is 47.8%. Rallies failed during
the 2018 correction when the 50-dMA was 48% or below.
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.
-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: +2on 14
April. (Non-Crash Sentiment is bullish; Breadth has made a bullish
divergence from the S&P 500; the Fosback New-hi/new-low Logic Indicator is
bullish; and Smart Money is -1 (bearish) since it is now “overbought”.)
(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:
IBB has the highest momentum; IBB (iSharesBiotech
ETF) is the best of the bad.
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%. The rest are then
ranked based on their momentum relative to the leading stock.
United Technologies is now Raytheon Technologies, ticker symbol
RTX. I’ll need to do some work to bring
this up to date. For now, ignore RTX in
the momentum analysis.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to 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 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
Tuesday, the VOLUME, PRICE and NON-CRASH SENTIMENT
indicators are bullish; the VIX indicator is still giving a bear signal.
The 5-10-20 Timer System turned bullish yesterday 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 remained HOLD. If we do
retrace down, I’ll try to find a good buy-point. At that time, I’ll increase stock holdings
significantly.
