“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
“Bubbles tend to topple under their own weight. Everybody
is in. The last short has covered. The last buyer has bought (or bought massive
amounts of weekly calls). The decline starts and the psychology shifts from
greed to complacency to worry to panic. Our working hypothesis, which might be
disproven, is that September 2, 2020 was the top and the bubble has
already popped.” - David Einhorn, Greenlight hedge fund.
GDP-ADV (CNBC)
“Coming off the worst quarter in history, the U.S.
economy grew at its fastest pace ever in the third quarter as a nation battered
by an unprecedented pandemic started to put itself back together, the Commerce
Department reported Thursday. Third-quarter gross domestic product, a measure
of the total goods and services produced in the July-to-September period,
expanded at a 33.1% annualized pace..."
Story at...
https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html
JOBLESS CLAIMS (CNN.com)
“In a sign that the labor market is slowly continuing to
improve, 751,000 Americans filed for first-time unemployment benefits last
week, the Department of Labor said Thursday in its last report before the presidential
election. That's down 40,000 from the prior week, which was revised slightly higher.” Story at...
https://www.cnn.com/2020/10/29/business/unemployment-benefits-coronavirus/index.html
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:15 pm Thursday. US total case numbers are on the left axis; daily numbers
are on the right side of the graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 1.2% to 3310.
-VIX fell about 7% to 37.59.
-The yield on the 10-year Treasury rose to 0.827%.
Once again, we saw a weak close as the S&P 500 gave
back more than half-percent in the final 10 minutes of trading. That’s never a
good sign.
Yesterday’s low was accompanied by high volume (27% above
the current avg for the month) as one might expect with panic selling. Today’s
volume was also high at 120% above the monthly avg. Do today’s buyers know
something we don’t? I don’t think so; after further review, Wednesday’s close
does not look like a durable bottom. We always expect a bounce after a huge
down day, and we got it today, but I think we’ll see a return to selling and a
fall below Wednesday’s close of 3271 at some point in the near future. I suspect we’ll retest 3237 since it is the
recent correction bottom.
While a retest of the 23 Sept low at 3237 seems likely,
one wonders whether we’ll see a retest of the COVID 23 March 2020 low of 2237?
My guess is probably not, but it is not out of the question. First, I’ll worry
about the 3237 level. Then we’ll see.
One indicator a correction is over is when the S&P
500 outperforms the Utilities (XLU).
The daily sum of 20 Indicators improved from -8 to -7 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from -46 to -54. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term and many are trend following.
The correction is now 40 days old and the Index is 7.6%
below its prior high. Top to Bottom, the avg correction under 10% lasts about
35 days; the avg correction greater than 10% lasts 68 days, excluding major
50%-crashes. Top to bottom, we have seen a 9.6% range so far.
The Long Term NTSM indicator ensemble switched from HOLD
to SELL, 26 Oct. It remains Sell. The previous Sell signal was on 24 September.
We may have a bounce higher for a few days (signaled by
Bollinger Bands and RSI on Wednesday), but my opinion hasn’t changed: I remain bearish. I
think markets need to reset lower before they can make significant new-highs.
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…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
Here’s the revised DOW 30 and its momentum analysis. 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…https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals
improved to NEUTRAL.
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.
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 30% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 30% is a very conservative position that I re-evaluate
daily, but it is appropriate for the correction.
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%; if this correction is deep enough, 80% would not
be out of the question.
