"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
PENDING HOME SALES (MarketWatch)
“After two consecutive months of decline, the index of
pending home sales soared 44.3% in May as compared with April, the National
Association of Realtors reported Monday…Compared with a year ago, contract signings
were still down 5.1%...” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 8:20 PM Monday. Over the last week, new cases have been growing faster
than they were in April. There were about 38,000 new cases today, about 10,000 less than
yesterday. (I suspect the difference is due to reporting and not due to an improvement in disease transmission.) The steepening curve is the
graphic indication new-cases are growing at a dramatically faster rate than we
have seen at any time in the US.
While we may not completely shut-down again, it seems
likely to suppress the economic recovery.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.5% to 3053.
-VIX dipped about 5% to 33.1. (VIX
is still running higher than the day-by-day comparison to the 2009 recovery
after the March 2009 bottom. I think it is due to continued uncertainty today.)
-The yield on the 10-year Treasury rose slightly to 0.631%.
After Friday’s big drop, a bounce today was not a
surprise. Will it continue? Indicators are not giving a strong signal either
way, although there was significant improvement today. Let’s see if that trend continues.
The S&P 500 slipped 0.4% below its 200-day moving
average (200-dMA) Friday. We want to see consecutive closes below the 200-dMA
before we conclude the trend is down. We didn’t get it today. The Index closed 1.1% above its 200-dMA. The
S&P 500 is now 9.8% below its all-time high back in February. Volume
continues to be low, about 25% below its monthly average. That is typical after
bottoms, but we are 3 months past the bottom. One wonders whether we are
running out of buyers. Over the last 2 weeks, only 48% of the volume on the
NYSE has been up-volume.
The daily sum of 20 Indicators improved from -9 to
-1 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that negates the daily fluctuations improved from -39 to -38 (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 remained 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
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.
