“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
THE BUBBLE HAS POPPED
“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.
SENATE RECESS UNTIL 9 NOVEMBER (CCN.com)
“Fiscal stimulus is now a distant dream for the stock
market, as Mitch McConnell has recessed the Senate till November 9.” -
https://www.ccn.com/dow-falls-fiscal-stimulus-hopes-die-mcconnell-senate-order/
DURABLE ORDERS (NASDAQ / RTT News)
“Partly reflecting a rebound in orders for transportation
equipment, the Commerce Department released a report on Tuesday showing new
orders for U.S. manufactured durable goods jumped by much more than expected in
the month of September. The report said durable goods orders surged up by 1.9
percent in September...” Story at...
CONSUMER CONFIDENCE (APNews.com)
“U.S. consumer confidence dipped slightly in October as a
new wave of coronavirus cases appeared across the country. The Conference Board
reported Tuesday that its consumer confidence index fell to a reading of 100.9,
from 101.8...” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
5:15pm Tuesday. 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
-Tuesday the S&P 500 dipped about 0.3% to 3391.
-VIX rose about 3% to 33.35.
-The yield on the 10-year Treasury slipped to 0.775%.
The S&P 500 was recovering in the late day action and
seemed to be headed for a gren close, but gave back its improvement in the last
15 minutes and closed in the red – not a very encouraging sign for the bulls.
Everything I said yesterday, still seems to be true. Very few indicators moved much.
-S&P 500 is now about 0.5% below its 50-dMA and that
is a bad sign for the bulls.
-The 50-dMA of the % of stocks advancing on the NYSE was 49.2%.
(Any number below 50% is bearish.)
-We still have 2 Top-Indicators flashing warnings of a
top:
(1)The S&P 500 is 8.7% above its 200-dMA. Sell point
is 12%, but when Sentiment is considered, the signal is bearish.
(2)Breadth on the NYSE vs the S&P 500 index is bearish
because the S&P 500 is still too far ahead of the % of stocks advancing on
the NYSE.
The daily sum of 20 Indicators improved from -9 to -7 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from -24 to -37. (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 38 days old and the Index is 5.3%
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 (there was a long bounce), but this one is not officially
over until we make a new high.
The Long Term NTSM indicator ensemble switched from HOLD
to SELL, 26 Oct. It remains Sell. The previous Sell signal was on 24 September.
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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.
