"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
JOBLESS CLAIMS (CNBC)
“First-time claims for unemployment benefits totaled 2.1
million last week, the lowest total since the coronavirus crisis began though
indicative that a historically high number of Americans remain separated from
their jobs…The total represented a decrease of 323,000 from the previous week’s
upwardly revised 2.438 million.” Story at…
DURABLE ORDERS (MarketWatch)
“Orders for durable goods tumbled 17.2% in April, the government said Thursday, offering a fresh sign of how the
coronavirus crisis has hammered the U.S. economy.” Story at…
GDP-2ND ESTIMATE (CNBC)
“The U.S. economy shrank at an even faster pace than
initially estimated in the first three months of this year with economists
continuing to expect a far worse outcome in the current April-June quarter. The Commerce Department reported Thursday that the gross
domestic product, the broadest measure of economic health, fell at an annual
rate of 5% in the first quarter…” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:30PM. Nationwide, there were about 19,000 new-cases today, about 3,000 less
than yesterday. The 14-day growth factor dipped to 1.03 today, indicating
growth in new cases of about 3% per day.
The curve is flattening rather fitfully and growth in new cases remains.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 declined about 0.2% to 3030.
-VIX rose about 4% to 28.59.
-The yield on the 10-year Treasury was little changed at
0.695%.
Of course, the S&P 500 dropped. I covered my short
position yesterday!
The S&P 500 was up for most of the day and seemed to
be headed for another strong close, but then the President announced that he will
hold a Press Conference on China tomorrow.
After the announcement, the Index fell more than 1%. Suddenly, trade is
again a worry, not to mention the Chinese harassment of a Navy ship in the
South China Sea, formerly international waters, but now claimed by China.
Remember those islands the Chinese built with no objection by then Pres. Obama?
The S&P 500 remained 0.9% above its 200-dMA, but we
can’t feel optimistic given the late day sell-off. I’ve said recently, I’m
looking for successive closes above the 200-day before I add to stock holdings.
Now, I’ll wait a bit longer to see how markets react to the Presidential press
conference.
I’d like to see the S&P 500 close above the recent
3036 high to confirm the trend. One test for a trend break (in this case above
the 200-dMA) is for the Index to close 3% above the 200-day. That would be
about 3090. That’s an alternate to the “two-closes-above” rule that I have been
writing about recently.
Of course, if the markets tank, I’ll be looking for a
much lower entry point.
We still have a big nagging bearish sign:
Breadth on the NYSE vs the S&P 500 index has
drastically diverged from the S&P 500 index in a bearish manner. The Index remains way too far ahead of
breadth, at least using moving average comparisons that have usually proved to
be correct. That’s why I sold the rally and haven’t been in a hurry to get back
in.
Overall, we see mostly bullish signs. The daily sum of 20
Indicators improved from +9 to +11 (a positive number is bullish;
negatives are bearish). The 10-day smoothed sum that negates the daily fluctuations
improved from +34 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.
I remain skeptical of this rally, but with the S&P
500 now about 0.9% above its 200-dMA, I need to be flexible. I’ll turn into a
Bull and BUY if the S&P 500 can close above the recent 3036 high. I’m
delaying reentry a little. I don’t need to be in a rush if we are entering a
trade-war. In addition, I looked at some momentum stocks and their PEs. Of the top 4 momentum plays in my DOW
momentum system, only Microsoft and Intel were reasonably priced based on their
present and past PEs.
I wouldn’t be surprised if yesterday was the high for a
while, but I also wouldn’t be surprised to see markets continue higher.
RECENT POSITIONS
-SDS-ETF (2x short the S&P 500). - SOLD
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 remained
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 25% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
