“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
"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
JOBLESS CLAIMS (CNBC)
“The pace of unemployment claims declined again last week
as the U.S. jobs market continued its plodding recovery from the coronavirus
pandemic, Labor Department data showed Thursday. Initial claims totaled 1.54
million, compared with the 1.6 million expected from economists surveyed by Dow
Jones…” Story at…
PPI (MarketWatch)
“The wholesale cost of U.S. goods and services rebounded
in May after three straight monthly declines, the Labor Department said Thursday. The producer
price index rose 0.4% in May after a record 1.3% decline in the prior month.”
Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 11:15 PM. There were 26,000 new cases about 3,000 more than yesterday.
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.
TWO COVID POSITIVE HAIRSTYLISTS SAW 140 CLIENTS – THERE WERE
NO TRANSMISSIONS (CNN)
“No cases of coronavirus have been linked to two Missouri
hairstylists who saw 140 clients last month while symptomatic, county health
officials said. Both stylists worked at the same Great Clips location in Springfield.
The clients and the stylists all wore face coverings…” Story at…
My cmt: The new normal may be a more “open” than
anticipated, as long as everyone wears masks.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 dropped about 6% to 3002.
-VIX rose about 48% to 40.79.
-The yield on the 10-year Treasury slipped to 0.693%.
I’m ticked that bought at the top. I hate to be wrong! But
there were surprises today…
I mentioned yesterday that we had not seen a 90%
down-volume day during this rally. Next time I won’t say anything about it. Thursday,
there was 98% down-volume that qualified as a Lowry 90% Down-volume Day. I
looked that the period after the 2009 low to see if there were any days like
today. There were. After the 2009 low, the first two days that had down-volume
this high occurred 42 days and 115 days after that low. (We are currently
80-days past the 23 March 2020 low.) So, this one day needn’t be a bull killer.
Here’s what Lowry Research said on this subject: “A
single, isolated 90% Downside Day does not, by itself, have any long-term trend
implications, since they often occur at the end of short-term corrections. But,
because they show that investors are in a mood to panic, even an isolated 90%
Downside Day should be viewed as an important warning that more could follow.”
If we see another 90% down-volume day before a 90% up-volume day, the Trend has
more than likely changed.
I think the most telling issue is that the S&P 500 is
now 0.4% below its 200-dMA. I’ve seen trend breaks discussed in two ways. A
Trend Break occurs when: (1) The Index drops 3% below the trend line (2) The
Index closes below a trend-line on consecutive days. For our purposes either case
would signal more trouble ahead. (In this case the trend-line is the 200-dMA.)
We’ve been looking at the percentage of 15 ETFs that are
above their own 120-dMA. Today that number is 67%. A big drop from 100% just two days ago. Just
perusing the charts, it seems that a drop below 67% is bad news.
The daily sum of 20 Indicators declined from +7 to
-4 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations declined from +95 to +79. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term. The down-trend is a bearish
sign.
I didn’t make any changes in allocation today. Since
big-down days are often followed by a decent retracement up on the following
day, it is possible that we’ll see a couple of % gain on Friday. (I sold
positions mid-rally that were quite profitable – I may have given up those
profits with my buy-the-top, mis-step – we’ll see.)
I made a buy, albeit late in the rally, so I am essentially
Fully Invested, for lack of a better term (but on the conservative side). Thus,
at this point for me to make a change, I need data for guidance, or best yet, a
Sell-signal from my old stand-by indicators.
So far, I do not have a sell signal, Short-term or
Long-Term.
Short-Term: Market Internals are not bearish yet – the %
of stocks advancing on the NYSE over the last 10-days is 50.2% - more than half
have been advancing. It will need to drop below 50% to give a bearish signal. This is an ensemble indicator. Breadth would be the last shoe to fall.)
Long-Term: My long-term indicator is HOLD. Sentiment,
Price and Volume indicators are neutral while VIX has turned negative. This indicator
deteriorated a lot, but did not give a Sell signal.
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.
*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…
THURSDAY 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 50% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 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.
