"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
CONSUMER CONFIDENCE
The Conference Board Consumer Confidence Index® decreased
in July, after increasing in June. The Index now stands at 92.6 (1985=100),
down from 98.3 in June. The Present Situation Index – based on consumers’
assessment of current business and labor market conditions – improved from 86.7
to 94.2. However, the Expectations Index – based on consumers’ short-term outlook
for income, business, and labor market conditions – decreased from 106.1 in
June to 91.5 this month…“Consumer Confidence declined in July following a large
gain in June,” said Lynn Franco, Senior Director of Economic Indicators at The
Conference Board. “The Present Situation Index improved, but the Expectations
Index retreated. Large declines were experienced in Michigan, Florida, Texas
and California, no doubt a result of the resurgence of COVID-19. Looking ahead,
consumers have grown less optimistic about the short-term outlook for the
economy and labor market and remain subdued about their financial prospects.
Such uncertainty about the short-term future does not bode well for the recovery,
nor for consumer spending.” Press release at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 10:20 PM Tuesday. The US had about 72,000 new cases today roughly 10%
below recent, record daily-levels. The curve of total US cases is still
climbing steeply.
My daughter the ER nurse gets pissed off at the COVID neigh
Sayers. She says if you had to put a
6-year old in a body-bag (as she did) you might feel differently about it. As she pointed out, a
recent German study found that 80% of COVID patients had permanent heart
damage. Another problem her hospital is all too familiar with, Babies born with COVID, or a COVID positive Mom, are at very high risk
for SIDS (Sudden Infant Death Syndrome.) Wear masks stupid people.
-Tuesday the S&P 500 dipped about 0.7% to 3218.
-VIX rose about 3% to 25.44.
-The yield on the 10-year Treasury dropped to 0.582%.
Late day action was decidedly bearish as the S&P 500
dropped about ¾-percent from 2PM into the close. It closed at its low for the day, suggesting
more bearishness ahead since it may carry over into tomorrow. (Futures are flat
as I write this.)
Overall volume has been falling, but it remains above its
pre-crash levels so my concerns about falling volume a few weeks back may have
been overblown. There are recent bearish signs, though.
The Bearish cross on MACD for S&P 500 got more
bearish, while the MACD of NYSE Breadth stayed about the same – slightly bullish.
I’m not sure which one to believe. I suppose I remain a skeptical bull, but
with recent weakness, Consumer Confidence falling and Coronavirus news getting
worse, we may need a more bearish stance.
The daily sum of 20 Indicators improved from -3 to
-1 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations declined from +19 to +17. (These
numbers sometimes change after I post the blog based on data that comes in
late.) Most of these indicators are short-term.
I don’t see major divergences in the internals. Utilities outperformed relative to the
S&P 500 today, but the Index is still outperforming on a longer term – no
sign of a pullback in that indicator. Friday’s indicator review looked pretty
good, too. Until we see some more negative signs, it looks like the markets can
go higher. Tomorrow may be telling, if the markets can shake off today’s
weakness and move higher. Otherwise, some further consolidation may be in the
works.
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…
TUESDAY 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.
