“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
JOBLESS CLAIMS (CNBC)
“New filings for jobless claims in the U.S. totaled 787,000
last week, the lowest total since the early days of the coronavirus pandemic.”
Story at...
https://www.cnbc.com/2020/10/22/weekly-jobless-claims.html
EXISTING HOME SALES (MarketWatch)
“Existing-home sales increased for the fourth consecutive
month in September, as the U.S. housing market benefitted from low interest
rates. Total existing-home sales rose 9.4% from August...
https://www.marketwatch.com/story/existing-home-sales-soar-by-more-than-9-in-september-2020-10-22
LEADING ECONOMIC INDICATORS – LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. increased 0.7 percent in September to 107.2 (2016 = 100),
following a 1.4 percent increase in August and a 2.0 percent increase in July.
"The US LEI increased in September, driven primarily by declining
unemployment claims and rising housing permits. However, the decelerating pace
of improvement suggests the US economy could be losing momentum heading into
the final quarter of 2020," said Ataman Ozyildirim, Senior Director of
Economic Research at The Conference Board.” Press release at...
HERD MENTALITY – HUSSMAN COMMENTARY EXCERPT (Hussman
Funds)
“Even based on corporate fundamentals that were in place
at the February peak, 2020 is the first time in history that our estimate of
prospective 12-year returns has been negative for this portfolio mix [60% in the
S&P 500, 30% in Treasury bonds, and 10% in Treasury bills]. But ask any
investor, and you’ll find that, to a person, they’re all super-excited about it. That’s
because they see the ink on the paper and the pixels on the computer screen,
and they don’t give a moment’s thought to the prices that they’re paying in
relation to the future cash flows they will receive. Put another way, they
don’t care about value, they care about price.” – John Hussman, PhD.
https://www.hussmanfunds.com/comment/mc201016/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
5:15pm 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. The
take-away? BIG JUMP in new-cases today.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.5% to 3453.
-VIX dropped about 2% to 28.11.
-The yield on the 10-year Treasury rose to 0.866%.
BROKEN RECORD REPORT – NOT MUCH CHANGE:
The Index remains stretched above its 200-dMA, now 10.4%
above it. (12% is my Bear sign.) When Sentiment is considered, it is a bearish
sign now. That’s one topping indicator. Two more are that the S&P 500 is
too far ahead of Breadth (stocks advancing on the NYSE) and the late-day
indicator is overbought.
The daily sum of 20 Indicators improved from -8 to -2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +27 to +14. (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 35 days old and the Index is 3.6%
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% drop so far. It seems odd to
talk about correction, but this one is not officially over until we make a new
high. It will probably be over if they can agree on a Stimulus Bill.
The Long Term NTSM indicator ensemble has been HOLD for
the last 20 days after a SELL before that. The Price indicator is bullish;
Volume and Sentiment Indicators are neutral. VIX is bearish.
I remain bearish, but I’m watching the indicators. While
internals are currently pointing down, the Stimulus Bill is the wild card and
should support a move higher, although the top is limited. 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.
