EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 15.2 million barrels from the
previous week. At 484.4 million barrels, U.S. crude oil inventories are about
2% above the five year average for this time of year.” Report available at…
BERNANKE SEES NO QUICK RECOVERY (msn.news)
“The U.S. economy could shrink by 30% or more this
quarter as stay-at-home orders aimed at slowing the coronavirus outbreak choke
off business and it could be a couple of years before the economy regains its
footing, former Federal Reserve Chair Ben Bernanke said Tuesday.” Story at…
WILL CORONAVIRU CAUSE RECESSION? (Observer.com)
“As shown by data from the National Bureau of Economic
Research, which tracks economic recessions, and the World Atlas site, the
Russian Flu pandemic of 1889-1890 was followed by a recession in 1890 and 1891;
the notorious Spanish Flu of 1918 emerged just before the twin recessions of
1918-1919 and 1920-1921; the Asian Flu, from 1957 to 1958, coincided with a
dreadful recession during the same years; and there was the Hong Kong flu of
1968-1969, which preceded the 1969-1970 recession.” Story at…
CHINA END LOCKDOWN OF WUHAN (MSNnews)
“China on Wednesday ended its lockdown of Wuhan, the city where the coronavirus first emerged…Within the
city, however, tough rules on individuals and businesses are still in place to prevent the virus from regaining a
foothold. Officials continue to urge everyone to stay at home as much as possible. Schools are
still closed….Of mainland China’s more than 80,000 reported cases of the virus,
nearly two-thirds have been in Wuhan…Across Wuhan, nearly 94 percent of
businesses — almost 11,000 of them in total — have resumed operations, said Hu
Yabo, the city’s deputy mayor, at a recent news briefing. For major industrial enterprises,
the rate exceeded 97 percent. For service companies, it was 93 percent. It is
unclear how much business they are actually doing, however. At industrial
companies in Wuhan, only 60 percent of employees are on the job, and
electricity consumption is one-fifth less than what it was this time last year,
said Dang Zhen, another city official, at the same briefing.” Story at…
On 6 April, in my “CORONAVIRUS ISSUES ARE NOT OVER”
commentary, I mentioned that the first case of Coronavirus was 1 March based on
WSJ reporting. The WSJ article for Saturday/Sunday April 4-8, 2020 was wrong.
Here’s the deal…
FIRST US CORONAVIRUS CASE (New England Journal of
Medicine)
“On January 19, 2020, a 35-year-old man presented to an
urgent care clinic in Snohomish County, Washington, with a 4-day history of
cough and subjective fever…He disclosed that he had returned to Washington
State on January 15 after traveling to visit family in Wuhan, China….On January
20, 2020, the CDC confirmed that the patient’s nasopharyngeal and oropharyngeal
swabs tested positive for 2019-nCoV by real-time reverse-transcriptase–polymerase-chain-reaction
(rRT-PCR) assay… Treatment with intravenous remdesivir (a novel nucleotide
analogue prodrug in development10,11)
was initiated on the evening of day 7, and no adverse events were observed in
association with the infusion… As of January 30, 2020, the patient remains
hospitalized…all symptoms have resolved with the exception of his cough, which
is decreasing in severity.” Report at…
CORONAVIRUS
The COVID19 Johns Hopkins website reported twice as many
new cases today compared to yesterday. There were 36,000 new cases today.
That’s the biggest increase in new-cases in the entire COVID19 dataset. NY says
they are improving. One wonders if the virus is gaining ground in more rural
areas.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 rose about 3.4% to 2750.
-VIX dropped about 7% to 43.35.
-The yield on the 10-year Treasury rose to 0.770.
Mr. O’Keeffe, Chief Investment Officer for Stifel Finance,
predicted Tuesday on CNBC that the current relief rally would end at 2750.
Today’s close was there. We’ll have to see in the coming days if his team is
correct.
Michael Markowski runs an independent stock research
shop. He says, “…declines of 10% or greater within five days from a high is the
beginning of a crash and not a correction.” That’s what we had the recent
all-time high. He says the correct action now is to “Liquidate everything
except for stocks under $5 per share by Tuesday, April 14th.” See his
commentary here…
A retest would be a good thing, because it would tell us
if we can safely buy back in. On the other hand, a recession and crash are no
fun so I can’t pull for that outcome. I also think that the “sell everything”
advice is a bad idea.
Today’s S&P 500 level of 2757 represents a retracement of
45% from the prior low back toward the all-time high. 57% retracement (2810) is
the average for this type of rally; 52% is the median. (I’ve been reporting 50%
average…close enough.) The rally has lasted 12 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 19% from its all-time high.
Today is day 35 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.
The only bearish signs out there: Bollinger Bands are
very close to an overbought indication; Money Trend has rolled over and is
falling.
We saw 93% up volume today, but once again, the S&P
500 faded at the end of the day so we didn’t get a bullish 90% up-volume signal.
Overall, the daily sum of 20 Indicators remained
from +8 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from +48 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.
Based on history, a retest of the low is still the most
likely outcome, but it is difficult to sit back and watch the markets march
higher. There is no guarantee of a retest and I don’t know of any indicator
that would indicate whether we’ll see one or not. The rally looks like it can
continue higher.
RECENT STOCK PURCHASES
-SSO. SOLD
-Biotech ETF (IBB). #1 in momentum. We’re in a health
crisis so perhaps this will be a good longer-term hold too.
-Apple. SOLD
-XLK. Technology ETF spreads some risk and gives exposure
to Microsoft, Cisco, etc.; was #1 in momentum before the crisis.
-Starbucks. SOLD
I took small losses on the stock trades.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +4**
Most Recent Day with a value other than Zero: +4 on 8
April. (Non-Crash Sentiment is bullish; Breadth has made a bullish
divergence from the S&P 500; Money Trend is bullish; and the Fosback
New-hi/new-low Logic Indicator is bullish.)
(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:
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%%; in this case, -100%
because the market has been so bad. The rest are then ranked based on their
momentum relative to the leading stock. The highest ranked are those closest to
zero.
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…
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 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
Wednesday, the VOLUME, PRICE and NON-CRASH SENTIMENT
indicators are bullish; the VIX indicator is still giving a bear signal.
The Long-Term Indicator remained HOLD. I sold some stocks
1 April. If we do retrace down, I’ll try to find a good buy-point. At that time, I’ll increase stock holdings
significantly.
