"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
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
CONSTRUCTION SPENDING (MarketWatch)
“Spending for U.S. construction projects dropped a
smaller than expected 2.9% in April, the Commerce Department said Monday.”
Story at…
ISM MANUFACTURING (Reuters)
“U.S. manufacturing activity eased off an 11-year low in
May, the strongest sign yet that the worst of the economic downturn was behind
as businesses reopen, though the recovery from the COVID-19 crisis could take
years because of high unemployment. The Institute for Supply Management (ISM)
said on Monday its index of national factory activity rose to a reading of 43.1
last month from 41.5 in April…” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 10:40PM. The 14-day growth factor was 1.07, indicating growth in new
cases of about 7% per day. The curve is
flattening rather fitfully and growth in new cases remains. We need to see a
growth-factor below 1.0 before we can be optimistic.
These numbers are based on U.S. totals; local data will
be different.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.4% to 3056.
-VIX rose about 3% to 28.23. (The
Options Boys may be having doubts about the rally.)
-The yield on the 10-year Treasury slipped to 0.653%.
We went from a high-volume day Friday (40% higher than
the monthly average), to volume today that was about 15% below the monthly
average. Weird. Friday was not an options
expiration day so it may have been caused by Trump’s china announcement. That
turned out to be a mild response when the markets seemed primed for a renewed
Trade War. Are we running out of buyers?
Repeating: The S&P 500 closed at 3056, above the
recent highs; with a lot of bullish signs around, it is time to put some cash
to work - even though I misread the morning down-draft today. The market bottomed about 11:30 as I was checking the charts. Oh well...
The daily sum of 20 Indicators slipped from +8 to
+7 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from +65 to +71. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
A few 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, at least using moving average comparisons that have usually proved to
be correct.
-The S&P 500 has been crawling along its Upper trend
line for the last four sessions. That may continue or not, but it does tend to
limit the possibility for big jumps higher. It also suggests the odds of a dip
are slightly more than the odds of going higher.
And this from CITI…
I will increase stock holdings to 30% of the portfolio
total Tuesday, and add more later. I still doubt the rally so I’ll add slowly,
but there are too many bull signs to stay out longer.
RECENT POSITIONS
-SDS-ETF (2x short the S&P 500). – SOLD. Loss 15%.
That’s why I limit the size of exposure to 2x positions,
especially when shorting.
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…
MONDAY 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. I will add to stock positions Tuesday, to increase to
30% invested in stocks.
