“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
MARKET MANUFACTURING PMI / MARKET SERVICES PMI (Reuters)
“Data firm IHS Markit said on Friday its flash U.S.
Composite PMI Output Index, which tracks the manufacturing and services
sectors, rose to a reading of 55.5 this month. That was the highest since
February 2019 and was up from 54.3 in September. A reading above 50 indicates
growth in private sector output...” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 6:25pm Friday. 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? ANOTHER VERY HIGH NUMBER of new-cases today. Just looking at the
chart, it appears this wave of COVID19 will be worse than the previous peak
with consequences for us all.
I attended an anniversary party at a friend’s house last
weekend. 11 days later, the hostess called to say that one of the guests was diagnosed
with Covid19. The all-clear is 14-days, so I am waiting. This is where testing
would be helpful. Guests could have asymptomatic disease. All of the guests
need to be tested; how else can you stop the spread? I have received no calls
from the Health Department, so tracing after the party is apparently not taking
place.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose about 0.3% to 3465.
-VIX dropped about 2% to 27.5.
-The yield on the 10-year Treasury rose to 0.842%.
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 100-dMA of the %
of stocks advancing on the NYSE (Breadth) is above 50%.
-McClellan Oscillator is above zero and improved today.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
-The 5-10-20 Timer System is BUY; the 5-dEMA and the
10-dEMA are above the 20-dEMA.
NEUTRAL
-The 50-dMA % of stocks advancing on the NYSE (Breadth) is
above 50% today, but it has been below 50% for the prior 2 days, so I’ll call
this neutral for now.
-Bollinger Bands – neutral. They were bearish 12 Oct.
-Overbought/Oversold Index, a measure of advance-decline
data.
-Statistically, the S&P 500 gave a panic-signal, 3
September. Now it is Neutral.
-Non-crash Sentiment indicator remains neutral.
-The Fosback High-Low Logic Index is neutral.
-RSI was very close to overbought 13 Oct, but it remains
neutral.
-There have been 12 up-days over the last 20 days.
Neutral
-We’ve seen 6 up-days over the last 10-days. Neutral
-VIX has slowed its rise and it turned neutral today.
-51% of the 15-ETFs that I track have been up over the
last 10-days – neutral.
BEAR SIGNS
-The S&P 500 is 10.8% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is bearish.
-The smoothed advancing volume on the NYSE is falling.
-The 10-dMA of stocks
advancing on the NYSE (Breadth) is below 50% Friday.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bearish crossover 19 Oct.
-Breadth on the NYSE vs the S&P 500 index is bearish
because the S&P 500 is outpacing stocks advancing on the NYSE. (This one has gotten more bearish this week.)
-MACD of S&P 500 price made a bearish crossover 22
October.
-My Money Trend indicator; the
signal is bearish.
-Long-term new-high/new-low data.
-Short-term new-high/new-low data.
-The Smart Money (late-day action) is still headed down.
This indicator is based on the Smart Money Indicator (a variant of the
indicator developed by Don Hayes).
-Only 2.3% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made new all-time-highs. (This stays in the
negative column until we make a new high.)
-The S&P 500 is under-performing the Utilities ETF
(XLU).
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 12
bear-signs and 5 bull-signs. Last week, there were 8 bear-signs and 9
bull-signs.
The daily sum of 20 Indicators declined from -4 to -5 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +12 to -5. (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 36 days old and the Index is 3.2%
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 21 days after a SELL before that. The Price indicator is bullish;
Volume, VIX and Sentiment Indicators are neutral.
Indicators have deteriorated some since last Friday while
the S&P 500 dipped about 1% over the week.
The Stimulus Bill looks less likely now. I don’t think Pelosi
wants to give Trump a win before the election.
I remain bearish, but I’m watching the indicators. 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
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
dropped to BEARISH.
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.
