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…
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…
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…
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…
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
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.
