JOBLESS CLAIMS (Reuters)
“A record 22 million Americans have sought unemployment
benefits over the past month, with millions more filing claims last week,
underscoring the deepening economic slump caused by the novel coronavirus
outbreak… A total 22.034 million people have filed claims for jobless benefits
since March 21.” Story at…
HOUSING (MarketWatch)
“Builders started construction on new homes in the U.S.
at a pace of 1.22 million in March, the Commerce Department said Thursday. This
represented a 22% decrease from a revised
1.56 million in February, but was 1.4% higher than a year
ago…Permitting activity, however, slowed down less drastically.” Story at…
My cmt: Housing is considered by many to be a reliable
recession indicator.
PHILADELPHIA FED INDEX (MarketWatch)
“The Philadelphia Fed manufacturing index in April dropped
to -56.6 after registering -12.5 in March. This is the lowest reading since
July 1980.” Story at…
RECESSION THRU 2021 (CNBC)
“Morgan
Stanley CEO James Gorman sees
the coronavirus-induced global recession lasting for the entirety of this year
and 2021. When asked about how a potential economic recovery expected in
the second half of this year would take shape… [he said] ‘If I were a betting man, it’s somewhere
between a `U’ or ‘L’ shaped recovery…’I would say through the end of next year,
we’re going to be working through the global recession.’” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 4PM Thursday. The numbers continue to bounce around and today’s numbers
jumped up! In the U.S., there were 29,000 new cases today vs. 25,000 new cases
yesterday. That’s an increase, however, the 5-day average growth rate was 0.98,
i.e., new case numbers are falling on average. The curve continues to slowly
flatten while total cases increase. We
have not seen the peak in total cases yet.
I pointed out yesterday that re-opening right now could
be problematic and allow the virus to return in force. A growth rate of 0.98
means that the numbers are dropping by about 2% per day. Today’s number would
mean that it could take 6-weeks before we stop seeing new cases, but as I’ve
mentioned regularly, there is a lot of variability on the stats.
These are U.S. numbers. Local results will be different. NY
will keep non-essential businesses closed until 15 May. Virginia has extended
closings for non-essential businesses until at least 8 May. The Virginia stay-at-home
order will remain in effect until 10 June. So, restaurants can open while
customers have to stay at home? I’m sure we’ll see more clarification on the
orders later. For more see here…
REMDESIVIR
The anti-viral drug, Remdesivir, was mentioned on CNBC
late today as treatment for the Coronavirus.
S&P 500 futures rose immediately and it was up about 2% at the 5pm close.
Anecdotally, the staff at one for the hospitals where the drug is undergoing a
trial was positive on the results. (The trial is ongoing; there are no official
results yet.) The drug was mentioned in this blog on 8 April in a piece titled “FIRST
US CORONAVIRUS CASE (New England Journal of Medicine)” linked here…
It’s nice if this treatment turns out to be a “cure,” but
there are issues. The estimated cost is around $1,000 for a course of treatment
and it is an intravenous treatment so it would have to be given in a hospital
or clinical environment adding more cost. The news may give the markets a
bounce tomorrow, but this may not be the happy-happy news that Wall Street
wants to see. A vaccine will be.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.6% to 2800.
-VIX slipped about 1% to 40.11.
-The yield on the 10-year Treasury slipped to 0.624.
Today was one of those weird days when all the numbers
looked bad, except for the Dow, Nasdaq and S&P 500. NYSE decliners were
nearly twice advancers; down-volume was more than double up-volume; and
new-lows outpaced new-highs. Usually when the internal numbers are counter to
price, price adjusts the next day, i.e., we might expect a down-day Friday for
the major indices.
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 again on the lower
trend-line. I am getting tired of the chart; the pattern
is set to break soon. If the chart guys
are right, the break will be down. We’ll see
Tuesday’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 17.3% from its all-time high.
Today is day 40 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 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 +52 to
+54. (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. The
40-dMA of new-highs is still falling; the S&P 500 chart is bearish; and the
50-dMA of Breadth is 46.1%. Rallies failed during the 2018 correction when the
50-dMA was 48% or below.
Tomorrow will be interesting since the Coronavirus Task
Force was presenting guidelines for opening the economy as I write this.
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: +3**
Most Recent Day with a value other than Zero: +3 on 15
April. (Non-Crash Sentiment is bullish; Breadth has made a bullish
divergence from the S&P 500; Money Trend turned bullish; 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…
THURSDAY 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
Thursday, 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.
