NONFARM PAYROLLS (MarketWatch)
“The coronavirus pandemic destroyed 20.5 million U.S. jobs
in April, driving the unemployment rate to a post World War Two high of
14.7%... The unemployment rate leaped to 14.7% from a 50-year low of just 3.5%
two months ago…” Story at…
STOCK MARKET VALUATION (Advisor Perspectives)
“Our monthly
market valuation updates have long had the same conclusion: US
stock indexes are significantly overvalued, which suggests cautious expectations
on investment returns. In a "normal" market environment -- one with
conventional business cycles, Federal Reserve policy, interest rates and
inflation -- current valuation levels would be a serious concern.” – Jill
Mislinsky. Story at…
My cmt: 20-years ago there were 4000 issues traded on the
NYSE; now there are about 3000. Considering population growth, there are now
more investors chasing fewer stocks. Supply
and demand suggest that the cost must go up, i.e., PEs should be higher now than
in the past. How much higher? I haven’t
got a clue.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:45 PM. Nationwide, there were about 27,000 new-cases today, about 1,000
more 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 nearly constant from April forward with small 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
-Friday the S&P 500 rose about 1.7% to 2930.
-VIX dropped about 11% to 27.98.
-The yield on the 10-year Treasury rose to 0.069.
RESISTANCE POINTS:
61.8% Fibonacci Retracement: 2950
200-dMA: about 3004
The Prior all-time High: 3386
Time for Friday’s rundown of some important indicators:
BULL SIGNS
-MACD of S&P 500 price made a bullish crossover 26 Mar.
-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 size of up-moves has been more that down-moves over
the last month.
-The 5-10-20 Timer System is BULLISH, because the 5-dEMA
and the 10-dEMA are above the 20-dEMA.
-VIX jumped sharply higher when the correction started
and is falling.
-Long-term new-high/new-low data is bullish.
-Short-term new-high/new-low data is bullish.
-The Fosback High-Low Logic Index is bullish.
-100-dMA of Breadth (advancing stocks on the NYSE) is now
moving up.
-My Money Trend indicator bounced
up, but there is a cluster of signals on the chart – it can’t seem to make up
its mind.
NEUTRAL
-The S&P 500 is neutral relative to its 200-dMA.
-Bollinger Bands and RSI are in neutral territory.
(Bollinger Bands are close to overbought, but not there yet.)
-Statistically, the S&P 500 has been bearish due to
several panic-signals, but it is now in the Neutral category.
-Over the last 20-days, the number of up-days is neutral.
BEAR SIGNS
-Breadth on the NYSE vs the S&P 500 index is diverging
from the S&P 500 index in a bearish manner.
The Index is 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%, but just barely at 49.98%. During
the Sept-Dec 2018, 20% correction, this stat never got above 50%. That isn’t
necessarily the norm, though.
-Overbought/Oversold Index, a measure of advance-decline
data, is bearish. (This indicator isn’t followed much anymore.)
On Friday, 21 February, 2 days after the top of this
pullback. There were 10 bear-signs and 1 bull-sign. Now there are 13 bull-signs
and 5 bear-signs. Last week there were 8 bull-signs and 8 bear-signs.
The (29 April) S&P 500 level of 2940 represented a
retracement of 61% from the prior low back toward the all-time high. Today, we
made it back to a 60% retracement level. The index has climbed back to within ½% of the prior rally
high.
57% retracement (2890) is the average for this type of
rally; 52% is the median. The rally has lasted 33 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.)
The daily sum of 20 Indicators improved from +6 to
+9 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from +57 to +65. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
Indicators have become more bullish, so I am riding the
wave, although at a somewhat under-invested, conservative level.
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: +3**
Most Recent Day with a value other than Zero: +3 on 8 May.
(Non-Crash Sentiment is bullish; New-High/New-Low data is bullish; and the Fosback
Logic Indicator 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…
Here’s the gain in the last 2-months for the ETFs I track.
Some of the bad actors are having their day and that’s not being captured in the
momentum analysis.
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…
Here’s the gain in the last 2-months for the Dow 30. Some
of the dogs are having their day and that’s not being captured in the momentum
analysis.
FRIDAY 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
Friday, 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 up stock holdings to 50%, but
I will wait for a better entry point, before getting less defensive.
