JOBLESS CLAIMS (CNBC)
“Unemployment rolls continued to swell in the U.S. last
week, though jobless claims hit their lowest level since the economy went into
lockdown made to battle the coronavirus pandemic. First-time filings for unemployment insurance hit 3.17
million last week, bringing the total to 33.5 million over the past seven weeks…”
Story at…
PRODUCTIVITY (MarketWatch)
“U.S. productivity fell at a 2.5% annual clip in the
first quarter, the biggest drop since the fourth quarter of 2015, the
government said Thursday.” Story at…
WILL MARKETS RETEST THE LOWS? (Real Investment Advice)
“Maybe…Warren Buffett calls out Energy, Retail, Airlines,
and Non-Residential Real Estate (read REIT’s) as industries that have
been destabilized and will not likely resemble the past in terms of growth and
profitability, you have to question your investment “risk.” Those
sectors are core reflections of the broader economy, and while Technology are
insulated from complete revenue destruction, they are not immune from a slow-down
in personal and business spending. There is risk to the downside
currently, more so than there is to the upside. As we head into the “seasonally
weak” period of the year, coupled with a deluge of weak economic and
earnings data, this is likely a good time to rebalance portfolio risk.”
Commentary at…
My cmt: We note that Warren Buffet reportedly didn’t buy
anything. “…[D]espite Berkshire
Hathaway’s record cash pile, Buffett says he has not been on a
buying spree, because there
hasn’t been anything ‘that attractive.’” Story at…
FEAR OF MISSING OUT – FOMO – IS NOT A GOOD SIGN (CNBC)
“The fear of missing out has played a role in recent
market movements but that’s “not a good sign,” according to Andrew
Harmstone, head of global balanced risk control strategy at Morgan Stanley
Investment Management. Harmstone said investors should keep their portfolio
risk level low and maintain a defensive position while looking for
opportunities to add value in an environment of “extremely high” volatility…the
real extent of that damage [to the economy] will become “visible” in the next
phase, beginning with “actual bankruptcies” or at least downgrades of
companies, Harmstone said. The market is likely to respond accordingly, he
warned.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:50 PM. Nationwide, there were about 25,000 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 1.1, i.e., average new cases
are increasing at a rate of 10% per day over the last 5-days. The 10-day growth
rate was 1.08. 1.1 is considered the growth rate for pandemic growth. Numbers
continue to bounce around. Growth is nearly constant from April forward with
reductions starting at the end of April indicated by the curve diverging from
the red-line..
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 fell rose about 1.1% to 2881.
-VIX dropped about 8% to 31.44.
-The yield on the 10-year Treasury slipped to 0.067.
RESISTANCE POINTS:
61.8% Fibonacci Retracement: 2950
200-dMA: about 3004
The Prior all-time High: 3386
Surprisingly, the Bear Signs I mentioned yesterday didn’t
change too much:
-MACD of price still looks like we may soon see a bearish
crossover. So far, the MACD of S&P 500 price indicator has done well. It is
not yet bearish.
-Breadth vs. the S&P 500 is moving toward a bearish
divergence, but it’s not a sell yet.
-Money Trend is still headed down.
-Smart Money is still headed down again. This indicator has
been pointing bearish for a while.
-As we look at the chart of the Index, we see that the
Index is crawling along its lower trendline. Multiple closes below trend would
be concerning, but we aren’t there yet.
-5-day Rate of Change (ROC) of VIX flopped back below zero
today. No bearish sign there.
The above collection of indicators is leaning bearish, but
we still need to see confirmation. At this point, we can’t say that it’s time
to sell the rally – it may be getting close though.
Today we had very high unchanged volume. In theory this in an indication that
investors are confused and it can signal a reversal, in this case down. I don’t
know – sometimes it does; more often than not…not.
The daily sum of 20 Indicators improved from +5 to
+6 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from +51 to +57. (These
numbers sometimes change after I post the blog based on data that comes in late.)
Most of these indicators are short-term.
Last Wednesday’s closing (29 April) 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 32 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 14.9% from its all-time high.
Today is day 55 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 still have a slightly bearish lean, but it will take a
bit more time to see where the indicators go. 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: +1**
Most Recent Day with a value other than Zero: +1 on 7 May.
(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
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
Thursday, the SENTIMENT, PRICE, VOLUME & VIX
indicators are bullish. This just means conditions are good – it may be too
late to buy, although I have been wrong before.
The 5-10-20 Timer System remained bullish, because the
5-dEMA and the 10-dEMA are above the 20-dEMA. This is a good indicator on its
own.
The
long-term indicator remained BUY. I may bump p stock holdings to 50%, but
I will wait for a better entry point, before getting less defensive.
