"This imaginary person out there - Mr. Market - he's
kind of a drunken psycho. Some days he gets very enthused, some days he gets
very depressed. And when he gets really enthused, you sell to him and if he
gets depressed you buy from him. There's no moral taint attached to that."
- Warren
Buffett
EMPIRE STATE MANUFACTURING (FoxBusiness)
“Economic activity of manufacturers in New York State
improved slightly in May compared to April but remained in deep contraction
levels, data from the Federal Reserve Bank of New York showed Friday. The
Empire State Manufacturing Survey's general business conditions index stood at
minus 48.5 in May…” Story at…
RETAIL SALES (CNBC)
“Consumer spending tumbled a record 16.4% in April as the
backbone of the U.S. economy retrenched amid the coronavirus pandemic,
according to a government report Friday.” Story at…
INDUSTRIAL PRODUCTION (WSJ)
“U.S. industrial production posted the steepest one-month
fall on record in April as efforts to control the
coronavirus pandemic closed factories, sapped demand and froze
global supply chains. Industrial production, a measure of factory, mining and
utility output, decreased a seasonally adjusted 11.2% in April from the prior month…”
Story at…
JOLTS (LA Times)
“U.S. job openings plunged in March to the lowest level
since May 2017 as the COVID-19 pandemic began unleashing its devastating impact
on the economy. The number of available positions plummeted to 6.19 million
from a revised 7 million in February...” Story at…
INDUSTRIALS PREDICT LONG RECESSION (NTSM)
This bearish chart shows that cyclical industrial stocks
(XLI-ETF) are under-performing the S&P 500, by a lot.
This is typical in corrections and bear markets. It shows investors are
worried about recession. It also indicates no "V" recovery.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:15 PM. Nationwide, there were about 22,000 new-cases today, about 8,000
less than yesterday. (I sometimes up-date the data later in the evening and
that may make some of today’s stats seem odd compared to what I may have
written yesterday.) Growth is slowing as indicated by the curve diverging from
the red line. The 10-day growth factor was about 1.05 today, indicating growth
of 5% per day.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.4% to 2864.
-VIX fell about 2% to 31.89.
-The yield on the 10-year Treasury rose to 0.646%.
One of the simplest indicators is to just count the
number of positive days over a given period.
For example, the S&P 500 has had 7 up-days over the last
10-days. That is mildly bearish and
usually brings on a negative day on day 11, Monday in this case. If we were to see 8 up-days in the last
10-days, that would be a significant bearish sign. While one might be temped to
conclude that if Monday is an up-day it would trip that bearish 8 number, but
it doesn’t. That’s because in the 10-day
moving average, we would drop the current day 10 and add Monday’s value. Since day
10 was an up-day, we would be dropping a bull-day and adding a bull-day so even
if Monday is an up-day, the number would remain 7 up-days in the last 10.
Time for Friday’s rundown of some important indicators:
BULL SIGNS
-MACD of stocks advancing on the NYSE (breadth) made a
bullish crossover 26 Mar.
-The Utilities ETF (XLU) is under-performing the S&P
500 index over the last 2 months and this is a bullish sign.
-Non-crash Sentiment is bullish. (If the downturn deepens
and becomes more extended, I’ll switch to crash sentiment; that would take a
much lower value to issue a buy-signal.)
-The 5-10-20 Timer System is BULLISH, because the 5-dEMA
and the 10-dEMA are above the 20-dEMA, but this is very close to a neutral
indication.
-VIX jumped sharply higher when the correction started
and is falling.
-Long-term new-high/new-low data is bullish.
NEUTRAL
-The size of up-moves has not been significantly more
that down-moves over the last month.
-Short-term new-high/new-low data is neutral.
-The Fosback High-Low Logic Index is neutral.
-Overbought/Oversold Index, a measure of advance-decline
data, is neutral.
-The S&P 500 is neutral relative to its 200-dMA.
-Bollinger Bands and RSI are in neutral territory.
-Statistically, the S&P 500 has been bearish due to several
panic-signals, but it is now in the Neutral category.
BEAR SIGNS
-MACD of S&P 500 price made a bearish crossover 13 May.
-100-dMA of Breadth (advancing stocks on the NYSE) has
been falling.
-Breadth on the NYSE vs the S&P 500 index diverged
from the S&P 500 index in a bearish manner.
The Index was too far ahead of breadth.
This is a good indicator, but sometimes it is early.
-The last hour, Smart Money (late-day action) is headed
down – the Pros are selling based on the Smart Money Indicator (a variant of
the indicator developed by Don Hayes).
-Cyclical Industrials are underperforming relative to the
S&P 500, by a lot.
-The 50-dMA of stocks
advancing on the NYSE (Breadth) remains below 50%, at 47%. During the Sept-Dec
2018, 20% correction, this stat never got above 50%. That isn’t necessarily the
norm, though.
-Over the last 20-days, the number of up-days is mildly
bearish.
-My Money Trend indicator is sharply
down.
On Friday, 21 February, 2 days after the top of this
pullback. There were 10 bear-signs and 1 bull-sign. Now there are 6 bull-signs
and 8 bear-signs. Last week there were 13 bull-signs and 5 bear-signs.
Overall, the daily sum of 20 Indicators improved
from -7 to +1 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations declined from +18 to +16.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
I am currently bearish. While many are looking at this
pullback as a medical event that will be “cured” as soon as we have some good
reopening or treatment news, there could be more to it. Valuations are extreme and a
reversion-to-mean could be much more painful. This isn’t a prediction; just a
cautionary thought.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +1**
(Non-Crash Sentiment is bullish.
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
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 25% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
