“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
SENATE FAILS TO PASS STIMULUS BILL (USA Today)
“The Senate on Wednesday failed to pass a $500 billion COVID-19
stimulus package as relief negotiations drag on less than two weeks before
Election Day.” Story at...
This is not surprising. The Bill had little chance since
it was opposed by Democrats and had no chance in the House. The Big Bill that
the Administration and Pelosi continue to work on is in trouble, too. Senate
Republicans oppose the amount of the Pelosi proposal (more than 2-trillion; $7,000
for every man woman and child in the US) and now McConnel is worried about the
possibility that the stimulus bill could jam up the Senate and stop the Barrett
Supreme Court confirmation. Maybe that has been Pelosi’s plan all along – who knows?
FED BEIGE BOOK (Forex)
“-Growth continued but was slight-to-modest
-Manufacturing generally increased at moderate pace”
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the
previous week. At 488.1 million barrels, U.S. crude oil inventories are about
10% above the five year average for this time of year.” Story at...
http://ir.eia.gov/wpsr/wpsrsummary.pdf
ALL IN AGAIN (Real Investment Advice)
“Given that markets are still hovering within striking
distance of all-time highs, there is no need to take action immediately.
However, the continuing erosion of underlying fundamental and technical
strength keeps the risk/reward ratio out of favor. As such, we
suggest continuing to take actions to rebalance risk.
1.Tighten up stop-loss levels to current support levels
for each position.
2.Hedge portfolios against major market declines.
3.Take profits in positions that have been big winners.
4.Sell laggards and losers.
5.Raise cash and rebalance portfolios to target weightings.
As stated, the market’s long-term dynamics remain
unfavorable, and the liquidity-fueled rally from the March lows have only
exacerbated previous overvaluations...
... we think 2021 may start the “payback” process
as economics and fundamentals play catch up with reality.” – Lance Roberts.
Commentary and analysis at...
https://realinvestmentadvice.com/technically-speaking-market-bulls-are-all-in-again/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:45pm Wednesday. 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
-Wednesday the S&P 500 slipped about 0.2% at 3436.
-VIX dropped about 2% to 28.65.
-The yield on the 10-year Treasury rose to 0.823%.
If the S&P 500 were to make a quick push back to the
prior all-time highs, the Index would be close to 15% above its 200-dMA. That’s
rarified air and a stretched market that suggests a correction. The Index has
only been 15% above its 200-dMA after major corrections. Given that we are
already seeing some topping indicators give warnings, it is hard to imagine
that the S&P 500 can climb much above the prior high, even if it manages to
scratch its way to that lofty level. It’s possible; just not likely.
I was surprised to see another Sell signal pop up today: As
we previously noted, the MACD of Breadth is bearish. Now, we need to add that
the 50-dMA of Breadth (stocks advancing on the NYSE) is also negative (below 50%). Taken
together, this is not a good sign.
As the chart below shows, the Utility/S&P 500 spread is
now quite Bearish. Utilities are outpacing the Index, shown by the falling red line
in the chart. That wouldn’t be happening if investors were confident.
The Index remains stretched above its 200-dMA, now 9.9% 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 now, the late-day indicator is overbought.
The daily sum of 20 Indicators dropped from -6 to -8 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +43 to +27. (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 34 days old and the Index is 4.1%
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 19 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 as noted above, the top end is limited.
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.
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDNESDAY 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.
