"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
RELAXING THE VOLKER RULE (CNBC)
“FDIC officials said they are loosening the restrictions
from the Volcker Rule, allowing banks to more easily make large investments
into venture capital. The companies will also be able avoid setting aside cash
for derivatives trades between different affiliates of the same firm.” Story at…
My cmt: This news was out early so it is probably not responsible
for the late 1% jump in the S&P 500.
AFTER THE CLOSE – FED INCREASES BANK RESTRICTIONS (CNBC)
“The Fed said in a release that big banks will be
required to suspend share buybacks and cap dividend payments at their current
level for the third quarter of this year. The regulator also said that it
would only allow dividends to be paid based on a formula tied to a bank’s
recent earnings.” Story at…
JOBLESS CLAIMS (YahooFinance)
“More than three months into the COVID-19 crisis in the U.S., countless Americans are
still unemployed. According to the U.S. Labor Department, weekly initial
jobless claims data showed yet another week of claims exceeding 1 million. Another
1.48 million Americans filed for unemployment benefits in the week ending June
20…” Story at…
DURABLE ORDERS (SME)
“Durable
goods orders increased in May, paced by a massive surge in orders for
transportation equipment, the Commerce Department said in a
report today. Orders
rose 15.8 percent to $194.4 billion last month.” Story at…
GDP-3RD ESTIMATE (Marketwatch)
“The pace of contraction in the economy was left at 5% in
the first quarter in the final estimate from the Commerce Department on
Thursday.” Story at…
IMF PREDICTS DEEPER GLOBAL RECESSION (Bloomberg)
“The International Monetary Fund downgraded its outlook
for the coronavirus-ravaged world economy, projecting a significantly deeper
recession and slower recovery than it anticipated just two months ago. The fund
said Wednesday it now expects global gross domestic product to shrink 4.9% this
year, more than the 3% predicted in April. For 2021, the fund sees growth of
5.4%, down from 5.8%.” Story at…
My cmt; Ruh-roh!
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 8:00 PM. Over the last week, new cases have been growing as fast as they
were in April. There were 83,000 new cases today, assuming this is not a typo. The updated number as of 10:45 PM is "only" 49,000 new cases. I'll update the chart tomorrow. This is still a record number of new cases. This
is more than double the highest number of new cases I have previously recorded.
One issue with my data is that I usually get the number of
cases between 5 and 6 PM. Since new cases are still being added, it is not the final
daily total. Today’s number of cases may be higher because I got the number
later than usual. In any event, it still
looks extraordinarily high, even if we cut it in half. The S&P 500 is 9%
below its all-time high. Is the economy only 9% worse? The 5% GDP drop
announced today was the worst since 2008, in the middle of the Great Recession,
and lower numbers are expected for the second quarter.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.1% to 3131. (Almost
the entire gain was in the last hour of trading.)
-VIX slipped about 5% to 32.22.
-The yield on the 10-year Treasury slipped to 0.681%.
In a surprise, NIKE announced after the close that the
company lost 790-million dollars this quarter (Jan-March). That may dampen the
bullish fervor, but I am wondering if anything will.
We continue to see MACD of Breadth on the NYSE and MACD
of S&P 500 price giving bearish signals. Even after the big move today, the
Smart Money (based on late-day-action) remains bearish. Both long-term and
short-term measures of new-high/new-low data are negative.
The daily sum of 20 Indicators improved from -14
to -3 (a positive number is bullish; negatives are bearish). The 10-day
smoothed sum that negates the daily fluctuations improved from -37 to -36
(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.
It wouldn’t take too many days like today to flip
indicators to the bull side, but so far, they remain neutral to 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 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.
