ISM NON-MANUFACTURING (Institute for Supply Management)
“Economic activity in the non-manufacturing sector contracted
in April for the first time since December 2009, ending a 122-month period of
growth, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®…“The
NMI® registered 41.8 percent, 10.7 percentage points lower than the March
reading of 52.5 percent.” Press release at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:35 PM. Nationwide, there were about 19,000 new-cases today, about 3,000
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.)
The 5-day growth-rate was 0.96, i.e., average new cases
are decreasing at a rate of 4% per day over the last 5-days. The 10-day growth
rate was 0.97. Three weeks ago, both the 5-day and 10-day rates were below 1,
but they have remained high since then. These numbers will need to be repeated
before we can say that we are past the peak of new-case growth. 1.1 is considered
the growth rate for pandemic growth. At least we have slipped below that level.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.9% to 2868.
-VIX dipped about 7% to 33.61.
-The yield on the 10-year Treasury rose to 0.663.
RESISTANCE POINTS:
61.8% Fibonacci Retracement: 2950
200-dMA: about 3004
The Prior all-time High: 3386
Friday, we noticed that the S&P 500 had dropped to a
point that was creating a new lower trendline, so a bounce was possible.
Yesterday we saw an outside reversal-day, or a key reversal day. This is defined as “A price chart pattern in
which a security's high and low prices for the day exceed those of the previous
trading session. If the market finished higher, it's a positive reversal.” That
was the impetus for the strong opening today. The bulls must be disappointed with
the fade in the last hour of the day. My Smart Money indicator (a variant of
the Smart money indicator developed by Don Hayes) is based on tracking late-day
action since that is when the Pros trade. Currently, it is pointed sharply down,
a bearish sign. Overall though, my indicators are somewhat mixed.
The daily sum of 20 Indicators improved from zero
to +6 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from +43 to +50.
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term.
Still the short-term indicator based on Internals remained
Neutral while the long-term NTSM indicator is bullish.
Last 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 30 days; the average length of a counter-trend
rally after a 15% waterfall decline is 21 days.
The median is 11 days. (Of course, it is possible that the rally ended 29
April at day 26 of the rally with the S&P 500 at 2940. That day was
statistically-significant in volume and price in my system and that occurs at
tops. Statistically-significant days also occur on days that aren’t tops.)
The Index is currently down 15.3% from its all-time high.
Today is day 53 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 3-weeks.
I don’t have a strong opinion of where the market is
going from here, but I am still leaning down; The Smart Money indicator is
often correct. Can we get higher than the previous rally high of 2940? We’ll see.
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 5 May.
(Non-Crash Sentiment is bullish; New-Hi/New-Low data is bullish; the Fosback Hi/lo
Logic Indicator 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…
TUESDAY 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 45% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the SENTIMENT, PRICE, VOLUME & VIX
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 remained BUY. I may bump up stock holdings to 50%, but
I will wait for a better entry point, before getting too aggressive.
