“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.
I MAY HAVE TO SKIP TUESDAY’S BLOG POST; I HAVE A MEDICAL
PROCEDURE SCHEDULED. WE’LL SEE.
CHICAGO PMI (amazonaws.com)
“The Chicago Business Barometer™, produced with MNI,
slipped to 58.2 in November. The index now stands at the lowest level since
August but remains in expansion...Demand cooled in November with New Orders
dropping by 5.0 points to its lowest level since August. New Orders fell for
the first time since May, while Production dipped 1.2 points.” Press release
at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
5:15 pm Monday. 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. (I
averaged cases over the Holiday.)
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dipped
about 0.5% to 3622.
-VIX slipped about 0.3% to 20.57.
-The yield on the 10-year
Treasury was little changed at 0.845%.
Here’s the Friday run-down (on
Monday) 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. I
skipped Friday because it was a short, Holiday trading-day.
BULL SIGNS
-11 Nov., we got a “Breadth Thrust” indication. That’s a rare,
very bullish sign.
-9 Nov. (Vaccine Announcement Day), the 52-week,
New-high/new-low ratio improved by 5.8 standard deviations – very bullish and
also rare.
-The 10-dMA of stocks
advancing on the NYSE (Breadth) is above 50%
-The 50-dMA % of stocks advancing on the NYSE (Breadth) is
above 50%.
-The 100-dMA of the %
of stocks advancing on the NYSE (Breadth) is above 50%.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-The 5-10-20 Timer System is BUY; the 5-dEMA and the
10-dEMA are above the 20-dEMA.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bullish crossover 4 Nov.
-MACD of S&P 500 price made a bullish crossover 5
November.
-McClellan Oscillator is above zero.
-The Fosback High-Low Logic Index is bullish.
-Slope of the 40-dMA of New-highs is rising.
-Long-term new-high/new-low data.
-Short-term new-high/new-low data.
-VIX is falling fast enough to give a Bull-signal.
-The S&P 500 is outperforming Utilities ETF (XLU).
-The Smart Money (late-day action) is bullish. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
NEUTRAL
-Bollinger Bands.
-Non-crash Sentiment indicator remains neutral, but it is
very elevated and leaning bearish.
-Statistically, the S&P 500 gave a panic-signal, 28
October. This usually means more downside to come, but the bear signal has
expired.
-There have been 12 up-days over the last 20 days.
Neutral
-We’ve seen 5 up-days over the last 10-days. Neutral
-51% of the 15-ETFs that I track have been up over the
last 10-days; not enough to give a signal.
-RSI.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500, but the trend is now down so this is in the neutral zone.
-The market has broadened out; 9.1% and 6.2% of all
issues traded on the NYSE made new, 52-week highs when the S&P 500 made a new
all-time-high on 24 November and 27 November respectively. The average over the
last 5 years has been about 7%.
BEAR SIGNS
-Breadth on the NYSE compared to the S&P 500 index is
warning of a correction at any time.
-The smoothed advancing volume on the NYSE is falling.
-My Money Trend indicator is trending down.
-The S&P 500 is 14.9% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is also bearish.
-Overbought/Oversold Index (Advance/Decline Ratio) is
overbought.
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 5
bear-signs and 17 bull-signs. Last week, there were 8 bear-signs and 15
bull-signs.
The daily sum of 20 Indicators
declined from +13 to +6 (a positive number is bullish; negatives are bearish).
The 10-day smoothed sum that smooths the daily fluctuations dropped from +90 to
+82. (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 Long Term NTSM indicator
ensemble switched back up to BUY, 24 Nov. Now, Price, & VIX are bullish;
Sentiment & Volume are neutral. The Indicator remains BUY, but I think we
are near a top so I am waiting.
I continue to see very bullish
indicators. The problem is that the market remains extremely overbought with
the S&P 500 14.9% above its 200-dMA. If past history follows, that tends to
cap the gains going forward.
I’ll continue to keep a low %
of funds in the stock market.
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
MONDAY MARKET INTERNALS (NYSE
DATA)
Market Internals declined to NEUTRAL on the market.
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.
The markets have not retested
the lows on these corrections and that has left me under-invested on the
bounces. I need to put less reliance on retests in the future.
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.
