"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
ISM MANUFACTURING (Institute for Supply Management/PR
newswire)
“Economic activity in the non-manufacturing
sector grew in June after two consecutive months of contraction, say the
nation's purchasing and supply executives in the latest Non-Manufacturing
ISM® Report On Business®…"The NMI® registered 57.1 percent, 11.7
percentage points higher than the May reading of 45.4 percent. This reading
represents growth in the non-manufacturing sector after a two-month period of
contraction preceded by 122 straight months of expansion. This is the largest
single-month percentage-point increase in the NMI® since its debut in
1997. (In April, the index suffered its biggest one-month decrease, a
10.7-percent drop.)” Press release at…
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“We view the current market pullback as normal within a
consolidation phase as of now. If the economic reopening and stimulus
narrative continues, the S&P 500 will likely have support on the downside,
limiting loss in value to a few percent; however, if that narrative changes to
one of virus spread and challenges with hospital capacity, it could signal a
pullback of 6% to 10%...” Commentary at…
JOBS DATA BROKEN (ZeroHedge)
“…as of this moment…there were 19.29 million workers receiving
unemployment insurance. And yet, somehow, at the same time
the BLS also
represented that the total number of unemployed workers is, drumroll, 17.75
million. If you said this makes no sense, and pointed out that
the unemployment insurance number has to be smaller than the total unemployed
number, then you are right. And indeed, for 50 years of data, that was
precisely the case.” Story at…
DC STATEHOOD IS CONSTITUTIONALLY DUBIOUS (NewsBug)
“…on June 26, for the first time in our nation's history,
the majority-Democrat U.S. House of Representatives passed along party lines
(save for a lone defection) a bill that would create the Douglass Commonwealth
(D.C.) as our nation's 51st state. Fortunately, this vote was nothing more than
political theater….But here's the troubling aspect about this vote: It pushes
forward the idea that the bulk of the District of Columbia - a federal enclave
functioning as the seat of the federal government - can be converted into the
Douglas Commonwealth, a co-equal sovereign state, by mere legislation. It
can't, at least not constitutionally, a fact agreed on by all Justice
Departments, Republican or Democrat, until President Barack Obama's attorney
general, Eric Holder, overruled his own Office of Legal Counsel because it had
come to the same conclusion.” – Zack Smith Heritage Foundation,
CORONAVIRUS IMMUNITY SHORT-LIVED (CNBC)
“Danny Altmann, professor of immunology at Imperial
College London, said that in towns and cities where there had been coronavirus
infections, only 10% to 15% of the population was likely to be immune. ‘And
immunity to this thing looks rather fragile — it looks like some people might have
antibodies for a few months and then it might wane, so it’s not looking like a
safe bet…Anybody who thinks that it has got more mild or gone away or that
somehow the problem’s going to solve itself is kidding themselves,” he told
CNBC. “It’s still a very lethal virus, it still infects people very, very
readily. And I think humanity isn’t used to dealing with those realities.”
Story at…
https://www.cnbc.com/2020/07/06/immunity-to-coronavirus-is-fragile-and-short-lived-expert-warns.html
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:50 PM Monday. Over the last week, new cases have been growing faster
than they were in April. There were about 32,000 new cases today, less than
yesterday. The steepening curve is the
graphic indication that new-cases are growing at a dramatically faster rate
than we have seen at any time in the US. I think the lockdown was expected to
result in a leveling off of virus cases as shown by the dashed line. Obviously, that has not happened.
-Monday the S&P 500 rose about 1.5% to 3180.
-VIX rose about 1% to 27.94.
(VIX is now lower than the day-by-day comparison to the 2009 recovery after the
March 2009 bottom. This tends to support the argument that we have seen the
final bottom of this correction and suggests further strengthening is
possible.)
-The yield on the 10-year Treasury rose slightly to 0.679%.
Today’s up day made 5-days up in a row. We’ve seen 8 up-days
in the last 10. That’s overly bullish so we’d expect a down day tomorrow or Wednesday.
We missed the Friday rundown of indicators due to the
Holiday, so let’s do it today.
BULL SIGNS
-The 50-dMA of stocks
advancing on the NYSE (Breadth) is above 50%.
-100-dMA of Breadth (advancing stocks on the NYSE) closed
above 50% today.
-The Fosback High-Low Logic Index is bullish and is
giving BUY signal. This indicator also gave a BUY signal 2 days after the 23
March bottom.
-The 5-10-20 Timer System switched to BUY, because the
5-dEMA and 10-dMA are above the 20-dEMA.
-Long-term new-high/new-low data is bullish.
-Short-term new-high/new-low data is bullish.
-The Utilities ETF (XLU) is under-performing the S&P
500.
-The smoothed advancing volume on the NYSE reversed to
bullish today.
NEUTRAL
-The S&P 500 is neutral relative to its 200-dMA. It
is not too diverging too far above or below it.
-The VIX has been rising recently, but not enough to
trigger a sell signal.
-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. (If the downturn deepens
and becomes more extended, I’ll switch to crash sentiment; that would take a
much lower value to issue a buy-signal.)
-Bollinger Bands are close to bear signals, but remain
neutral. RSI is neutral.
-The last hour, Smart Money (late-day action) is neutral,
but could turn bullish soon. This indicator is based on the Smart Money Indicator
(a variant of the indicator developed by Don Hayes).
-Overbought/Oversold Index, a measure of advance-decline
data, is neutral.
-MACD of stocks advancing on the NYSE (breadth) made a bearish
crossover 11 June, but it looks like it will be bullish soon.
-MACD of S&P 500 price made a bearish crossover 10
June, but it looks like it will be bullish soon.
-Over the last 20-days, the number of up-days is neutral.
-The percentage of 15-ETFs that are above their
respective 120-dMA was 60% Monday (same as last week). That’s a mid-level
number so we’ll just call it neutral. (This is a new indicator and I don’t have
much experience with it.
-Over the last 10-days, the number of up-days is mildly
bearish. We’ve had 5 straight up days, so we’re due for a down day or two. I
put this in the neutral column, because it isn’t very bearish unless we see
several more up days in a row.
BEAR SIGNS
-My Money Trend indicator turned down
recently.
-The size of up-moves has been smaller than the size of
down-moves over the last month.
-Breadth on the NYSE vs the S&P 500 index has
diverged from the S&P 500 index in a bearish manner. The Index remains way too far ahead of
breadth, at least using moving average comparisons that have usually proved to
be correct. (This indicator has been negative for a while.)
-Cyclical Industrials are under-performing relative to
the S&P 500.
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 bear-signs and
8 bull-signs. Last week there were 10 bear-signs and 4 bull-signs.
The daily sum of 20 Indicators improved from -4 to
+5 (a positive number is bullish; negatives are bearish). The 10-day smoothed
sum that smooths the daily fluctuations improved from -52 to -39 (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 BULLISH. Both MACD of Breadth and Price look
like they will turn bullish soon. I plan to increase stock holdings on
weakness, either tomorrow or later this week.
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 improved
to BULLISH 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. I’ll add to stock holdings in the next day or two – we are due for a
down day.
