“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
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 15.0 million barrels from the
previous week. At 518.6 million barrels, U.S. crude oil inventories are about
9% above the five year average for this time of year.” Report available at…
OUR RESTAURANTS CAN’T OPEN UNTIL AUGUST (WSJ)
“We closed our dining rooms March 15, two days before the
governor mandated we do so, and had to lay off some 700 employees…we realized
that we needed to hire back some of our staff to help with the demand [for
carryout]…When we asked our employees to come back, almost all said, “No
thanks.” If they return to work, they’ll have to take a pay cut…For my business…We
plan to open our dining rooms on Aug. 1, once the government stops paying
people $15 an hour, on top of standard unemployment compensation, to stay home.”
Commentary at…
My cmt: The Federal Government is augmenting state unemployment. In this case, the employees are paid nearly $400
more per week for not working than they would be if they were on the job. (And
we voted for these clowns?)
CONTAINING THE CRISIS [EXCERPT] - LATE APRIL COMMENTARY
(Hussman Funds)
“…our measures of market internals remain clearly
negative here, and are ragged enough that a shift to the uniformity we
associate with “speculation” is not even close. As a result, I presently view
the recent advance as a “clearing rally” to relieve the oversold compression
that I noted at the market lows. Again, we currently observe the fairly unusual
combination of overbought conditions, renewed valuation extremes, and still
unfavorable market internals. This is a moment that provides the opportunity to
adjust one’s investment exposure to full-cycle risk, not a time to chase what
Wall Street calls a “buying opportunity,” just 15% from the most extreme
valuations in history, at levels on the S&P 500 that currently match the
January 2018 market high, and that were never seen before that date…
…For those expecting a “V” bottom out of this, another
observation may be useful. As I’ve noted in prior downturns, a recession is
typically a period where the mix of goods and services that is demanded by the
economy no longer properly matches the mix of goods and services that is
supplied. It is unlikely that this precise mix will be wholly restored after we
recover. This means that many of the dislocations that we presently observe are
likely to persist longer than investors may imagine.” John Hussman, PhD.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30 PM Wednesday. The U.S. numbers continue to bounce around. Today,
there were 18,000 fewer cases than yesterday. Today’s 5-day growth
rate is 0.94, i.e., average new cases are falling at a rate of 6% per day over
the previous 5-days. It’s been a week since the numbers were falling.
As the chart shows, the curve did flatten in mid-April and
flattened more today; new-cases have continued to rise, although, at a somewhat
slowed pace. These numbers are based on U.S. totals; local data will be
different.
-Wednesday the S&P 500 rose about 2.3% to 2799.
-VIX dropped about 8% to 41.98.
-The yield on the 10-year Treasury rose to 0.626.
The S&P 500 climbed toward its 50-dMA and close 1.1%
below it. That looks like a strong resistance point so we’ll have to see if the
50-dMA can be breached.
The S&P 500 sold off about one-half percent in the
last 10 minutes of trading. That’s a bearish
sign and we’ll watch tomorrow t see if there is a bearish follow-thru.
Friday’s S&P 500 level of 2875 represented a
retracement of 55% 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 lasted 18 days (as of 17 Apr) if it is over; the average length of a
counter-trend rally after a 15% waterfall decline is 21 days. The median is 11 days.
Overall, the daily sum of 20 Indicators improved
from -1 to +4 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +60 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.
The disagreement between the Bulls and Bears is surprising. I could probably list a dozen “A-list”
experts on each side of the argument. The Bears are calling for a 50%+ crash
and regression to trend. The Bulls say the bottom is in and expect that 2650 (around
the S&P 500, 200-week average) will
be the low that will provide a bounce to new highs. My guess is in between. I
suspect that we’ll test the low and move up from there.
Based on history, a retest of the low is still the most
likely outcome. Still, if the market were to make new highs (above the
recent bounce), I would need to re-evaluate and increase stock holdings.
We’ll see.
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: +1 on 20
April. (Non-Crash Sentiment is bullish; Breadth is diverging from the
S&P 500 in a bullish direction; Money Trend Spread vs the S&P 500 is
bullish; and Smart Money is minus 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%. 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.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Wednesday, 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 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 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.
