"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
CONSUMER CONFIDENCE / NEW HOME SALES (Reuters)
“U.S. consumer confidence nudged up in May, suggesting
the worst of the novel coronavirus-driven economic slump was likely in the past
as the country starts to reopen, but it could take a while for the economy to
dig out of its hole amid record unemployment…The Conference Board said its
consumer confidence index edged up to a reading of 86.6 this month from a
downwardly revised 85.7 in April. Economists polled by Reuters had forecast the
index rising to 87.5 in May from the previously reported reading of 86.9 in
April.” Story at…
24 STATES HAVE UNCONTROLLED VIRUS SPREAD (Washington
Post)
“The coronavirus may still be spreading at epidemic rates
in 24 states, particularly in the South and Midwest, according to new research
that highlights the risk of a second wave of infections in places that reopen
too quickly or without sufficient precautions.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30PM. Nationwide, there were about 14,000 new-cases today, about 7,000 less
than yesterday. The 14-day growth factor slipped 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.
A growth rate of 3% means that overall cases will double every 3-weeks. We’re not out of the woods yet. We need to
see growth rate consistently below 1.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1.2% to 2992.
-VIX dropped about 0.5% to 28.01.
-The yield on the 10-year Treasury dipped to 0.701%.
The S&P 500 climbed above its 200-dMA at the open,
but retreated all day and especially in the last hour of trading. I’m still
looking for successive closes above the 200-day before I add to stock holdings.
Here’s a simple plot that can help discern trend
direction. Based on the % of Dow stocks that are below 50%, the trend appears to
be rounding over in a topping pattern.
Other important bear signs remain:
-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.
-The last hour, Smart Money (late-day action) is overbought
due to an extreme spread vs. the S&P 500).
-Advancing volume has been falling over the past 10-days.
The daily sum of 20 Indicators improved from zero
to +5 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from +21 to +22.
(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 0.3% below its 200-dMA, I need to be flexible. I’ll turn into a
Bull and BUY if the S&P 500 can close above its 200-dMA on consecutive
days. Still, the chart looks like a topping pattern to me…we’ll see.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: -2**
{Non-Crash Sentiment is bullish (+1); Breadth vs S&P 500
is bearish (-1); Money Trend/S&P 500 Spread is bearish (-1); Smart Money S&P
500 spread is overbought.}
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
RECENT POSITIONS
-SDS-ETF (2x short the S&P 500).
I was busy all day and away from the computer to cover this
short…Darn; but I never trade on a phone. It’s a security thing. Maybe I’ll get
lucky and today was a top. Hah! I never get that lucky.
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 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 + 5% 2xSHORT. You may wish to have a higher or lower % invested in
stocks depending on your risk tolerance.
