“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
HOUSING STARTS AND PERMITS (MarketWatch)
“Housing starts occurred at an 891,000 seasonally
adjusted annual rate in April, the Commerce Department said Tuesday, representing a 30% drop
from March. It was the slowest pace of new home construction since February
2015. Permitting activity for newly-built homes fell 20.8% between March and
April…” Story at…
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 1.2 million barrels from the
previous week. At 539.3 million barrels, U.S. crude oil inventories are about
15% above the five-year average for this time of year.” Story at…
POWELL SEMIANNUAL MONETARY TESTIMONY (WSJ)
“Federal Reserve Chairman Jerome Powell said recent
economic improvement could be jeopardized if Congress curtailed support to
workers displaced and businesses shuttered by the coronavirus pandemic. Despite a gain in
payrolls last month, Mr. Powell said 25 million workers remain
dislodged from their jobs.” Story at…
CASS FREIGHT INDEX (CASS Information Systems)
“Following what we believe was the trough in April, the
Cass Freight Index® showed some—but only little—improvement in activity last
month. The index for both shipments and expenditures
remained at recessionary levels and came in >20% below May 2019…We do not
believe we will reach 2019 freight activity levels until 2021 (at the earliest)
due to the significant rise in unemployment and other results of government
intervention.”
Report at…
My cmt: Key point: The Index has bottomed and is
improving, albeit, “barely higher”.
THE BIG FOUR ECONOMIC INDICATORS (Advisor Perspectives)
“There is…a general belief that there are four big
indicators that the [NBER Business Cycle Dating] committee weighs heavily in
their [recession] cycle identification process. They are: Nonfarm
Employment; Industrial Production; Real Retail Sales; Real Personal Income (excluding Transfer Receipts)…
Here is a percent-off-high chart based on an average of the Big Four.” – Jill
Mislinsky.
Commentary/analysis/more charts at…
My cmt: Recession over.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:30 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, an indication that the growth rate is little changed
over the last month. There have been 25,000 new cases (so far) today.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dipped about 0.4% to 3113.
-VIX fell about 0.6% to 33.47.
-The yield on the 10-year Treasury dipped to 0.734%.
VIX is falling and that is a bullish sign, but there are
some concerns. When I was reviewing my VIX indicator, I looked
at VIX from a number of angles. I didn’t
find a better indicator than the one I already had, but I did like Tom
McClellan’s VIX ROC indicator. I didn’t
add it to my system, because it gave a lot of false sell signals, but I do
track it now. It got me thinking though.
I went back to the March 2009 Financial Crash bottom and
I now track a daily comparison of the VIX off the 23 March 2020 bottom vs. the
2009 March bottom. We are now 60-days from the recent bottom, so we can look at
the VIX now vs. the VIX 60-days after the March 2009 bottom. It has been
tracking reasonably closely until the recent drop in the S&P 500. VIX bounced 42% above the 2009 VIX and has remained
higher for the last 5 sessions. That’s not a huge worry, they won’t track exactly
the same, but it is a bit of a concern. McClellan’s ROC of VIX also gave a sell
signal when VIX jumped higher as the S&P 500 dropped almost 6% in a day. My
VIX indicator was briefly negative, but quickly turned back bullish.
This may be just an academic discussion, or it may be
signaling that some weakness is due in the S&P 500. In mid-June of 2009,
the S&P 500 slipped 5%; recovered a couple of % and then dropped another 5%
to bottom in mid-July. Something similar seems possible now.
Today, Volume was 15% below the monthly norm. Yesterday, it was nearly
at the monthly average so this was a big drop today. Have we run out of buyers?
That would be very bearish.
The daily sum of 20 Indicators declined from +5 to
+1 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations declined from +50 to +42. (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 slipped to HOLD today; the
Short-Term Indicator remains Hold. 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.
They are still bearish.
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…
WEDNESDAY 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 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.
