"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
BIG TECH CRUSHES EARNINGS (Yahoo News)
“…after the bell
[Thursday], Apple, Alphabet, Facebook and Amazon reported their earnings
results. Each bested expectations, and all but one are up sharply in
after-hours trading.” Story at…
Other than Google, they were up double digits vs. the
same quarter a year ago. Wow! What Pandemic? Apple was up more than 10% on the
day.
PERSONAL INCOME (Pymnts.com)
“Disposable personal income fell by 1.4 percent in June
to $255 billion while personal spending increased $738 billion, a nearly 6
percent rise… ‘The scale and unprecedented nature of the COVID-19-driven
downturn will leave lingering scars during the recovery,” Bloomberg
economists Yelena Shulyatyeva and Eliza Winger said
in a commentary.’” Story at…
PCE PRICES (CNBC)
“Monthly inflation ticked up in June, driven by food and
energy goods and services prices, though the trend remained muted. The personal
consumption expenditures (PCE) price index excluding the volatile food and
energy components rose 0.2%...” Story at…
CHICAGO PMI (MarketWatch)
“A measure of business conditions in the Chicago region
came in at 51.9 in July, after registering 36.6 in June.”
Story at…
UNIVERISTY OF MICHIGAN SENTIMENT (BusinessInsider.com)
“The University of Michigan's consumer-sentiment gauge snapped
a two-month uptrend in July, offering an early sign that new coronavirus
outbreaks are reversing the economic recovery.
The university's index of consumer sentiment fell to 73.2
from June's reading of 78.1.” Story at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 9:00 PM Friday. The US had about 65,000 new cases today. The curve of total US
cases is still climbing steeply.
-Friday the S&P 500 rose about 0.8% to 3271.
-VIX dipped about 1% to 24.46.
-The yield on the 10-year Treasury slipped to 0.535%.
Today was a surprise all around. We got a weak open after
great tech earnings reports followed by an afternoon bounce that saved the day.
Still, internals were weak at the close as there was nearly 2 to 1 down-volume
to up-volume and declining issues outpaced advancing issues. We probably aren’t
out of this rough patch yet. The S&P 500 has gone sideways for nearly
3-weeks.
The daily sum of 20 Indicators remained -5 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from -3 to -7. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
Here’s the Friday run-down of some important indicators.
These tend to be both long-term and short-term so they are somewhat different
than the 20 that I report on daily.
BULL SIGNS
-The percentage of 15-ETFs that are above their
respective 120-dMA was 87% Friday, bullish.
-The 50-dMA of stocks
advancing on the NYSE (Breadth) is above 50%.
-100-dMA of Breadth (advancing stocks on the NYSE) is above
50%.
-The 5-10-20 Timer System remained BUY, because the
5-dEMA and 10-dMA are above the 20-dEMA.
NEUTRAL
- The S&P 500 is outperforming the Utilities ETF
(XLU), but its outperformance is falling so let’s call this one neutral.
-The Fosback High-Low Logic Index dropped to neutral.
- Breadth on the NYSE vs the S&P 500 index diverged
from the S&P 500 index and has been giving a sell signal since 11 May. 31
July it finally turned neutral. This indicator signaled a top at S&P 3207.
-The size of up-moves has been larger than the size of
down-moves over the last month, but for now, it remains in neutral territory.
-VIX is Neutral.
-The S&P 500 is neutral relative to its 200-dMA. It
is not too diverging too far above or below it.
-Statistically, the S&P 500 gave a panic-signal, 11
June. A panic signal usually suggests more to come. We did not see big negative follow-thru so
I’ll put this one in the negative category.
-Non-crash Sentiment is neutral.
-Bollinger Bands remain neutral, but are approaching an overbought
reading. RSI is neutral.
-Overbought/Oversold Index, a measure of advance-decline
data is neutral.
-Over the last 10 and 20-days, the number of up-days is neutral.
- The Smart Money (late-day action) is trending down, but
only slightly bearish so I’ll put this one in the neutral camp. This indicator
is based on the Smart Money Indicator (a variant of the indicator developed by
Don Hayes).
BEAR SIGNS
-Only 45% of the 15-ETFs that I track have been up over
the last 10-days – bearish.
-My Money Trend indicator is now
headed down.
-Long-term new-high/new-low data is bearish.
-Short-term new-high/new-low data is bearish.
-MACD of S&P 500 price made a bearish crossover 27July.
-MACD of stocks advancing on the NYSE (breadth) made a bearish
crossover 31 July.
- The smoothed advancing volume on the NYSE remained
Bearish.
-Cyclical Industrials (XLI-ETF) are underperforming the
S&P 500 – a bear sign.
On Friday, 21 February, 2 days after the top of this
pullback, there were 10 bear-signs and 1 bull-sign. Now there are 4 bull-signs and
8 bear-signs. Last week there were 10 bull-signs and 3 bear-signs.
It sure feels like we are near a top; however, I don’t
see major divergences in the internals although indicators are leaning bearish. Top Indicators are silent. It looks like the
markets can go higher, but the market has not made up its mind.
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…
FRIDAY 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. It is not far below my fully invested position which would be between
50-60%.
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.
