“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.
ADP EMPLOYMENT CHANGE (prnewswire)
“Private sector employment increased by 365,000 jobs from
September to October according to the October ADP National Employment Report®..."The labor market
continues to add jobs, yet at a slower pace," said Ahu Yildirmaz, vice
president and co-head of the ADP Research Institute. "Although the pace is
slower, we've seen employment gains across all industries and sizes."
ISM NON-MANUFATURING INDEX (prnewswire)
"The October Manufacturing PMI® registered
59.3 percent, up 3.9 percentage points from the September reading of 55.4
percent and the highest since September 2018 (59.3
percent). This figure indicates expansion in the overall economy for
the sixth month in a row after a contraction in April...”
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 8.0 million barrels from the
previous week. At 484.4 million barrels, U.S. crude oil inventories are about
7% above the five-year average for this time of year.” Story at...
http://ir.eia.gov/wpsr/wpsrsummary.pdf
UTILITIES STOCKS SHED SAFETY IMAGE AS INVESTORS BET ON
BLUE WAVE BUMP (WSJ)
“Utilities stocks have been standout performers in the
U.S. stock market lately. But not for the reasons that one traditionally might
think... The isolated rise in utilities shares underscores how the recent gains
in the sector are more than just a move to safety. Instead, investors say they
are betting that the group will be a key beneficiary if Democratic candidate
Joe Biden wins the presidential race thanks, in part, to his
green-energy proposals.
My cmt: Utilities weren’t the only Biden beneficiaries.
United Health was up 10% today on bets that Biden’s health care initiatives
will enrich the big insurance companies.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 6:10 pm 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 rose about 2.2% to 3443.
-VIX dropped about 17% to 29.57.
-The yield on the 10-year Treasury dropped to 0.749%.
In spite of a big run-up in
stock prices today, we had extremely high, unchanged-volume. That’s weird.
Usually in a big move up, especially at significant bottoms, everybody is
“on-board” and unchanged volume is very low. Some feel that when the NYSE
volume is high for stocks sold without a change in price, it signals investor
confusion and a possible turning point.
I’ve tried to develop an indicator based on this without much
success. Sometimes it’s true; sometimes
not. Today’s number was extremely high; it was this high on 19 Oct for the
big down day. The market did reverse up
for 3 days, before it gave back the gains.
Given that we saw a reversal the
last time unchanged volume was so high, we may expect a reversal and some down-days ahead.
We also note that today was a statistically significant
up-day. That just means that the price-volume move exceeded my statistical
parameters. Statistics show that a statistically-significant, up-day is
followed by a down-day about 60% of the time.
Statistically-significant, up-days almost always coincide with tops, but
not all statistically-significant, up-days occur at tops. I see no reason to
believe this is a significant top – a short term top, yes, but we’d need to see
more bear indicators to think this was a major top.
The daily sum of 20 Indicators improved from +2 to +10 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from -52 to -34. (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 44 days old and the Index is 3.8%
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% range so far.
It looks like this might be the third decent sized
correction in row that didn’t retest the low. While it did come within 1% of
the prior low, and I checked it as a retest, internals did not improve to give
us a buy signal. Dang frustrating!
The Long Term NTSM indicator ensemble switched to HOLD 4
Nov. Sentiment, Volume, VIX and Price indicators were all neutral.
I remain bearish, but the positive market action may make
me re-think my position. I expect a reversal down. On the other hand, we might
see continued Biden buying.
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.
For more details, see NTSM Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
turned BULLISH.
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.
