“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
“What is the difference between ‘heroic first responders’
and ‘systemically racist cops?’ Apparently, about 30-days in the news cycle.” –
Paul Jones, WSJ letter.
EXISTING HOME SALES (MarketWatch)
“Sales of previously owned homes slid 9.7% in May as the
coronavirus pandemic continued to weigh on the U.S. real-estate market…Compared
with last year, sales were down 26.6% in May…“Home sales will surely rise in
the upcoming months with the economy reopening, and could even surpass
one-year-ago figures in the second half of the year,” Lawrence Yun, chief
economist for the National Association of Realtors, said in the report.” Story
at…
LARRY ADAM WEEKLY COMMENTARY EXCERPT (Raymond James)
“Optimism surrounding the eventual US economic rebound
has led to the recent market rally. As we’ve mentioned in prior publications,
real-time activity metrics signaled that the ‘bottom’ likely occurred in April
and that the recovery process started in May. Since then, economic data points
have not only confirmed but have significantly exceeded the consensus
expectations of the bounce back in activity. In fact, the Citi Economic
Surprise Index, which measures the extent to which data is coming in versus
expectations, spiked ~30 points above its previous record high in 2011.
However, it is important to realize that this rate of acceleration from the
bottom and the magnitude of beats is likely not sustainable, it is more of a
reflection of a quicker than expected bounce off of severely depressed levels.
Due to the suddenness and rigidness of the shutdowns, the full recovery from
the significant virus-induced decline in economic activity (~12%) is not likely
to arrive until the end of 2021.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:15 PM. While the curve has flattened, indicating slowed growth in April
thru the first week in May, we can see that the curve is not diverging from the
dashed line since 9 May; in fact, over the last 5-days the growth of cases has
re-accelerated and is now growing as fast as it was in April. Let’s hope this
trend reverses. There have been 35,000 new cases (so far) today.
PROTESTORS TEAR DOWN STATUES OF GRANT (MSNnews)
“San Francisco police said that around 400 people
gathered around 8 p.m. to take the statue [of Ulysses S. Grant] down, though no
arrests were made, according to NBC Bay Area.
Also torn down in the park on Friday were the statues of
St. Junipero Serra and Francis Scott Key, who wrote the lyrics of ‘The
Star-Spangled Banner.’” Story at…
My cmt: Other than Abraham Lincoln, Grant may have done
more for the Black cause than any other President. He crushed the KKK after the
Civil War and ensured the black vote. During
Reconstruction, there were many black representatives in Congress due in large
part to U.S. Grant. Did they not
understand that he was a Union general? In Portland, “protestors” tore
down the statue of George Washington, the only framer who freed his slaves when
he died. At UVA, protestors covered Jefferson’s statue (founder of UVA) with a
white tarp with “White Supremacist” emblazoned on it in spray paint. They are
apparently ignorant of the fact that Jefferson wrote anti-slavery language into
the Declaration of Independence that was expunged during final drafts of the
Declaration by southern representatives. Jefferson also, proposed abolishing
slavery when he was in the Virginia House of Burgesses (as did Washington) – both
were obviously voted down in Virginia. Had they freed their slaves while others
didn’t, they would have been bankrupt pretty quickly, unable to compete on
price.
All of this reminds me of my recent trip downtown where
our city’s Civil War statue was vandalized while the police stood by. The words
“Fuck Amerikkka” were spray painted on the statue in bold, large letters. This
is more about anger, hate and ignorance than protest. One wonders whether there
could have been a better way to recruit white supremacists – I doubt it.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.7% to 3118.
-VIX fell about 10% to 31.77.
-The yield on the 10-year Treasury rose slightly to 0.706%.
We continue to see MACD of Breadth on the NYSE and MACD
of S&P 500 price give bearish signals. MACD of Breadth is showing a greater
divergence and that usually signals more conviction in the indicator. Are these
good indicators? Both MACD of Breadth and Price gave bear signals 2 days after
the top of this correction and bull signals 3 days after the bottom. On the
other hand, VIX continues to fall and that’s a good bullish indicator.
Volume on the NYSE was 25% below the monthly average today,
and this continues the pattern of low volume over the last several sessions
(except for Friday’s option expiration day).
Low volume is normal after a bottom – investors are usually slow to join
the party after a bottom - but may now indicate a loss of buyers since the
bottom is long past.
Repeating my earlier comment: “Bob Brinker, financial
advisor and writer of Bob Brinker’s Marketimer newsletter, had an interesting
comment in his April newsletter. He
compared the current sudden drop to the 1987 Crash. In that instance, the market
fell 33% in 8 weeks. There was a retest of the low via a lower low about
6-weeks after the major low. If we follow that scenario, a final bottom, or
retest, might be in June or July.”
If we look at other major drops, we note that during the
Dot.com crash in 2002 and the Financial Crash in 2009, the time from the
Waterfall Bottom to the final low, or a higher low retest, was about
5-months. That would put a retest in the
August-September time frame.
Of course, there is no guarantee that we’ll see a retest,
or a lower-low. In fact, most pundits have written it off and assume there will
not be a retest of the low. I would simply add that every correction in the
last 50 years, greater than 15%, has had a retest except the 20% correction in
2018-2019.
The daily sum of 20 Indicators improved from -8 to
-3 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations declined from +11 to -4 (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
My Long-term indicator remained HOLD today; the
Short-Term Indicator improved to Neutral. Since Indicators are not yet giving a
short-term Buy-signal, I am still under-invested. I’ll increase stock holdings if we see some
additional improvement in signals, especially the MACD & Money Trend
indicators.
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.
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 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 40% invested in stocks.
You may wish to have a higher or lower % invested in stocks depending on your
risk tolerance. 40% is a conservative position that I re-evaluate daily.
As a retiree, 50% in the stock market is about fully
invested for me – it is a cautious and conservative number. If I feel very
confident, I might go to 60%; had we seen a successful retest of the bottom,
80% would not have been out of the question.
