ISM MANUFACTURING (Institute for Supply Management)
“Economic activity in the manufacturing sector contracted
in March, and the overall economy grew for the 131st
consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®…“The
March PMI® registered 49.1 percent, down 1 percentage point from the
February reading of 50.1 percent…
“The coronavirus pandemic and shocks in global energy
markets have impacted all manufacturing sectors. Among the six big industry
sectors, Food, Beverage & Tobacco Products remains strongest, followed by
Chemical Products, which in addition to the pharmaceutical component, is a
significant contributor to the Food, Beverage & Tobacco Products Industry
and beneficiary of low energy and feedstock prices. Transportation Equipment
and Petroleum & Coal Products are the weakest sectors. Sentiment regarding
near-term growth this month is strongly negative, by a 2-to-1 ratio,” says
Fiore.” - Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply
Management® (ISM®) Manufacturing Business Survey Committee. Press release
at…
EIA CRUDE OIL INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 13.8 million barrels from the
previous week. At 469.2 million barrels, U.S. crude oil inventories are near
the five year average for this time of year.” Report at…
CONSTRUCTION SPENDING (BuilderOnline)
“Construction spending during February 2020 was estimated
at a seasonally adjusted annual rate of $1,366.7 billion, 1.3% below the
revised January estimate of $1,384.5 billion but 6.0% above the February 2019
estimate of $1,289.0 billion, the Census Bureau reported Wednesday. During the
first two months of this year, construction spending amounted to $193.5
billion, 8.2% above the $178.8 billion for the same period in 2019.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 4.4% to 2471.
-VIX rose about 7% to 57.06.
-The yield on the 10-year
Treasury dipped to 0.582.
The question remains, “Have we seen the bottom?” I looked
back at the bottom of the Financial Crash in March of 2009. Here’s the market
action I saw:
2009 2020
Gain in the first 10-days: 20% Gain in first 6-days: 15%
Gain in the next 5-days: -4%
Gain in the next 5-days: +6%
Gain in the next 5-days: +1%
Biggest down-day: -3.5% on day
15 Biggest down-day: 4.4% on day
7
Next biggest down day: -2% day 9.
It looks more like the prior bottom may not be THE
bottom. Today’s, 4.4% drop was bigger than any down-day in the month immediately
following the March 2009 bottom. If the prior low was the final bottom, the
Pros would all be buying and it would be a while before we saw a big down-day. Further,
today was a high, down-volume day and while it didn’t meet all the Lowry
Research tests, it does tend to negate
some of the bullishness from those high, up-volume days we saw immediately
after the recent low. The trend is
changing on overall up-volume too; up volume is falling.
The Index is currently down 33.9% from its all-time high.
(I think I had a typo here yesterday.) Yesterday, the rally retraced 30% of the
drop. The first Fibonacci retracement
level would be 38%, so its possible that the rally has ended. Unfortunately, we
don’t really know.
Overall, the daily sum of 20 Indicators improved
from +4 to +6 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from -4 to +13.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
Scary. Many of my indicators looked bullish today. Are my indicators smarter than the market? No, Mr. Market knows all.
It is still possible that we have seen the low or close
to it. Now, I think we will have a retest of that low. I will wait for a successful
retest before adding further to stock holdings.
The worry is that this market could play out like 2009.
After the markets made a significant bottom, they rallied, but then fell
another 27% before bottoming 2-months later.
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. Wish I had sold
a few days ago!
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +6**
Most Recent Day with a value other than Zero: +6 on 1 April.
(The S&P 500 is too far below its 200-dMA when sentiment is considered;
Non-Crash Sentiment is bullish; Breadth has made a bullish divergence from the
S&P 500; Money Trend has turned bullish; the Fosback New-hi/new-low Logic
Indicator is bullish; and Smart Money {late-day-action} is oversold.)
(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…Well, we had the bullish Breadth AND Volume reversal signals,
but nothing is ever certain, is it?
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
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%, rather minus 100%
since the market has been bad. The rest are then ranked based on their momentum
relative to the leading stock. The highest ranked are those closest to zero.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE 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 50% invested in
stocks. (I previously dropped stock allocations to 45% on 27 January and lower
a few days after the decline started.) You may wish to have a higher or lower %
invested in stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Wednesday, the New-High/New-Low, VOLUME, PRICE and
NON-CRASH SENTIMENT indicators are bullish; the VIX indicator is still giving a
bear signal.
There was another Breadth Thrust indication today, but
the previous one hasn’t convinced the crowds to buy, so today’s signal doesn’t
seem all that meaningful.
The Long-Term Indicator remained HOLD (ignoring the
Breadth Thrust). I probably dipped back
to 45% invested in stocks when 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.
