“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
JOBLESS CLAIMS (Reuters)
“A second wave of layoffs amid weak demand and fractured
supply chains is keeping new U.S. applications for unemployment benefits
elevated, supporting views that the economy faces a long and difficult recovery
from the COVID-19 recession. Initial claims for state unemployment benefits
totaled a seasonally adjusted 1.508 million for the week ended June 13, down
from 1.566 million in the prior week…” Story at…
PHILADELPHIA FED INDEX (MarketWatch)
“The regional Fed’s business conditions index rose to
27.5 in June from negative 43.1 in the prior month. Any reading above zero
indicates improving conditions.” Story
at…
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI)
for theU.S. increased 2.8 percent in May to 99.8 (2016 = 100), following a 6.1
percent decline in April, and a 7.5 percent decline in March. “In May, the US
LEI showed a partial recovery from its sharp decline over the previous three
months, as economic activity began to pick up again,” said Ataman Ozyildirim,
Senior Director of Economic Research at The Conference Board. “The relative
improvement in unemployment insurance claims is responsible for about
two-thirds of the gain in the index. The improvements in labor markets, housing
permits, and stock prices also buoyed the LEI, but new orders in manufacturing,
consumers’ outlook on the economy, and the Leading Credit Index™ still point to
weak economic conditions. The breadth and depth of the decline in the LEI
between February and April suggest the economy at large will remain in
recession territory in the near term.” Press release at…
JEREMY GRANTHAM INVESTMENT LETTER EXCERPT (ZeroHedge)
"…the market and the economy have never been more
disconnected" and while "the current P/E on the U.S. market is in the
top 10% of its history... the U.S. economy in contrast is in its worst 10%,
perhaps even the worst 1%.... This is apparently one of the most impressive
mismatches in history…my confidence that this will end badly is
increasing" Story at…
https://www.zerohedge.com/markets/investing-legend-jeremy-grantham-amazed-unprecedented-stock-bubble
IS THE MARKET OVERVALUED? (Advisor Perspectives)
“As we've frequently pointed out, these indicators aren't
useful as short-term signals of market direction. Periods of over- and
under-valuation can last for many years. But they can play a role in framing
longer-term expectations of investment returns. At present, market
overvaluation continues to suggest a cautious long-term outlook and guarded
expectations. However, at today's low annualized inflation rate and the
extremely poor return on fixed-income investments (Treasuries, CDs, etc.) the
appeal of equities, despite overvaluation risk, is not surprising.” – Jill
Mislinsky. Charts and commentary at…
My cmt: As noted above, one can’t rely on PE, or
over-valuation, for market timing. Markets can remain over priced for years.
Further, the laws of supply and demand suggest that PE levels should increase
over the years. We have more investors
chasing fewer stocks. Prices will go up.
IT DIDN’T FEEL LIKE A CORRECTION (Heritage Capital)
“…in a normal, young bull market, the stock market is
supposed to exceed last week’s high sooner than later as in by the end of the
month. However, I am skeptical that another big run higher has begun…I
think the best scenario for the bulls is that last week’s high and this week’s
low create a new trading range for a few weeks or so…The third scenario would
be one for the bears which would be confirmed by a close below Monday’s low.
That could create a quick woosh lower.” – Paul Schatz, President, Heritage
Capital. Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:45 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 23,000 new cases (so far) today.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.1% to 3115.
-VIX slipped about 1.6% to 32.94.
-The yield on the 10-year Treasury dipped to 0.709%.
Yesterday’s volume wasn’t 15% below the monthly average,
it was 25% below it. Today’s volume was 20% below the monthly average. I still
wonder whether the game is up. Low volume would seem to indicate low interest
and less buying. We will see.
Today was another day where unchanged volume was very
high. Some think this signals investor confusion and a possible reversal point.
That seems logical – sometimes it does, but I haven’t found this to be a
reliable indicator.
The daily sum of 20 Indicators declined from +1 to
-3 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations declined from +42 to +30 (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 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…
THURSDAY MARKET INTERNALS (NYSE DATA)
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.
