FED BEIGE BOOK
The social-distancing mandate needed to stem the
coronavirus epidemic led to a sharp and abrupt contraction in economic activity
across all regions of the country, according to the Federal Reserve’s Beige Book report released
Wednesday. And most business contacts think it will get worse.”
Story at…
RETAIL SALES (CNN.com)
“Americans aren't buying much beyond food right now, and
that's devastating huge swaths of the retail industry. US retail sales slumped
8.7% in March, their worst monthly decline on record in the data available from
the Census Bureau,
which dates back to 1992.” Story at…
EMPIRE STATE MANUFACTURING (MarketWatch)
“The New York Federal Reserve’s Empire State business conditions index plummeted a record 57
points to -78.2 in April, the regional Fed bank said Wednesday.” Story at…
INDUSTRIAL PRODUCTION (FoxBusiness)
“American industry collapsed in March as the pandemic wreaked
havoc on the U.S. economy. Manufacturing and overall industrial production posted
the biggest declines since the United States demobilized after World War II.”
Story at…
EIA CRUDE INVENTORIES (Reuters)
“U.S. crude oil stockpiles rose by 19 million barrels
last week, the biggest one-week increase in history, the U.S. Energy
Information Administration said, as refiners throttled back activity due to
slumping demand as a result of the coronavirus pandemic.” Story at…
TECHNICALLY SPEAKING (Real Investment Advice)
“What happens next depends on whether the current
situation is a 2008-like situation or not. If it is, we will most likely
sell-off again and retest the recent lows. If it is not, we are probably in for
a tough slog, but will not see S&P 500 @ 2200 again. The true test in
the weeks ahead will most likely be the stock market’s reaction to the inevitable
parade of negative news during earnings. If stocks that report, do not
fall, but remain stable or rise on bad news, the market will probably be okay
from here, but if stocks are not resilient after they tell their sad stories,
we may test the S&P500 2180 level again.” - Jeff Marcus from TP Analytics
as quoted in Real Investment Advice at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website.
In the U.S., there were 25,000 new cases today vs. 22,000 new cases yesterday. That’s
an increase, however, the 5-day average growth rate remained below 1.0. for the
third consecutive day, i.e., new case numbers are falling on average. The curve
continues to slowly flatten.
On 8 March, there were 600 coronavirus cases in the U.S.
5 weeks later, there are 600,000 cases and 25,000 new cases today. We increased
a thousand-fold in 5-weeks. So, if we lift restrictions and go back to normal
now, we might guess that 5 weeks from now we’d see 25,000,000 cases. Actually,
that number could be way too low, because growth is exponential; starting from
25,000 instead of 600 would result in a much bigger number. Needless to say,
the calls to end restrictions are too early.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 2.2% to 2783.
-VIX rose about 8% to 40.84.
-The yield on the 10-year Treasury dropped to 0.637.
As I first mentioned Monday, the below chart shows a
clear, bearish, rising wedge-pattern since the recent bottom. (See Monday’s blog if you want more details
on the chart pattern.) We also note that today’s close was exactly on the lower
trend-line. Another incredible
coincidence? 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.
Yesterday’s S&P 500 level of 2846 represented a
retracement of 53% 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 17 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 17.8% from its all-time high.
Today is day 39 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 declined
from +7 to +4 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations remained +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 46.8%.
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: +2 on 15
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%. 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’ve updated the data so the
DOW 30 Momentum analysis now includes RTX.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals slipped
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
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.
