“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.
CONSUMER CONFIDENCE
The Conference Board Consumer Confidence Index® declined
in November, after remaining relatively flat in October. The Index now stands
at 96.1 (1985=100), down from 101.4 (an upward revision) in October...“Consumer
confidence declined in November, after remaining virtually flat in October,”
said Lynn Franco, Senior Director of Economic Indicators at The Conference
Board. “Consumers’ assessment of present-day conditions held steady, though
consumers noted a moderation in business conditions, suggesting growth has
slowed in Q4. Heading into 2021, consumers do not foresee the economy, nor the
labor market, gaining strength. In addition, the resurgence of COVID-19 is
further increasing uncertainty and exacerbating concerns about the outlook.”
Press release at...
https://www.conference-board.org/data/consumerconfidence.cfm
THE BEANIE BABY CRAZE (New York Post)
“Journalist Zac Bissonnette’s...book “The Great Beanie
Baby Bubble” shows how Warner’s brilliance in this area created an investment
bubble as unstable as — and occurring simultaneously with — the Internet stock
bubble of the late 1990s...The first signs of decline came in January 1999,
when, after Ty announced a series of retirements, prices stayed relatively
stable. It was the first time since the beginning of the craze that prices did
not soar for a retired item. Ty also announced the release of 24 new Beanie
Babies that same day, and this was the true beginning of the end, as the
release overwhelmed collectors. Wholesale shipments fell by 20 percent over the
previous year, and Beanies were seen selling at flea markets for $3. Supply was
finally eclipsing demand, and retired issues were suddenly easy to find on
store shelves.” Story at...
https://nypost.com/2015/02/22/how-the-beanie-baby-craze-was-concocted-then-crashed/
The stock market peaked in early 2000. Today’s version of
the Beanie Baby, Bit-Coin, may be the canary in the coal mine for the stock
market. So far, Bit-coin continues to make new highs.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 7:30 pm 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. (I
averaged cases over the weekend.)
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose
about 1.6% to 3635.
-VIX dropped about 4% to 21.64.
-The yield on the 10-year
Treasury rose to 0.891%.
The S&P 500 made a new
high today and the % of new-52-week highs has improved significantly, indicating
that the market has broadened out. This cancels out the indicator that was suggesting
a correction greater than 10%. Has the market topped yet?
Usually, it takes 4 top-indicators
to indicate a top with reasonable confidence. There are still 3 top-indicators
warning of a top.
Those 3 are:
(1) The S&P 500 is
stretched too far above the % of stocks advancing on the NYSE.
(2) The S&P 500 is 15.4% above its 200-dMA. (Sell
point is 12%.) When Sentiment is considered, the signal is also bearish. This one
is very reliable, but it did max out at 20% in October after the March bottom
of 2009. Then, the market finally topped out in April 2010 and there was a 16%
correction.
(3) The Smart Money is
overbought. This tends to be a better buy-signal, but it is warning of a top.
One of the top indicators, The
Fosback Logic Indicator, is actually giving a Bottom/Buy-Signal due to very few,
new-lows. We also see a lot of new highs.
There is a lot of frothiness,
but the number of bullish signs suggests the S&P 500 could go higher. We
may need to see Bollinger Bands and RSI trip to the bear-side to signal a top. It
would take several more days like today to get those signals bearish.
The daily sum of 20 Indicators
improved from Zero to +6 (a positive number is bullish; negatives are bearish).
The 10-day smoothed sum that smooths the daily fluctuations slipped from 96 to
+94. (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, Volume & VIX are bullish;
Sentiment is neutral.
We should see a down day
Wednesday due to the big up-day today. Maybe, that will start some selling. Sorry
to be so unclear today; we have conflicted signals. If you decide to put more
money to work in stocks, expect to be nimble; we are due for a drop, but there’s
a lot of buying underway.
I’ll continue to sit out until
we see some more clarity.
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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained NEUTRAL.
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.
