“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.
DOUBLE DIP RECESSION? (ZeroHedge)
“...JPM chief economist Michael Farolil, who writes that
while the economy powered through the July coronavirus wave, "at that time
the reopening of the economy provided a powerful tailwind to growth. The
economy no longer has that tailwind; instead it now faces the headwind of
increasing restrictions on activity." Meanwhile, "the holiday
season—from Thanksgiving through New Year’s—threatens a further increase in
cases. This winter will be grim, and we believe the economy will contract
again in 1Q, albeit at “only” a 1.0% annualized rate."
In other words, the double dip is about to hit.” Story at...
https://www.zerohedge.com/markets/here-comes-double-dip-jpmorgan-forecasts-negative-gdp-next-quarter
My cmt: ZeroHedge likes conflict and extreme opinions,
however, a double-dip is certainly possible.
TOP OR NOT...
STOCK MARKET’S FOUNDATION IS SOLID – EXCERPT (Heritage
Capital)
“...we find a market that has run hard and fast. A pause
to refresh or mild pullback should be expected, but any and all weakness is a
buying opportunity until proven otherwise.” – Paul Schatz, President, Heritage
Capital. Commentary at...
https://investfortomorrow.com/blog/stock-markets-foundation-is-rock-solid/
My cmt: In my experience, when the S&P 500 makes a
new-all-time-high and the # of new-highs is very weak (as we saw at the recent
top), corrections tend to be greater than 10%. We’ll see.
TRUMP BROADENS EFFORT TO OVERTURN ELECTION – EXCERPT (WSJ)
“President Trump has broadened his push to overturn the
election outcome and threatened Republicans who challenge his refusal to
concede, as looming deadlines for key states to certify their results are set
to narrow the path for his legal challenges...The Trump legal team has said it
is aiming in some states to have Republican-controlled state legislatures
appoint pro-Trump electors who would swing the Electoral College in his favor.”
Story at...
https://www.wsj.com/articles/trump-broadens-his-efforts-to-overturn-election-outcome-11605800104
My cmt: Even the most ardent Trump supporter should
cringe at the suggestion that electors ignore the state’s popular vote. The electoral
college was originally designed to ensure that to become President, a candidate
must win a majority of states. While
that may not be strictly true now, the current system works because Electors vote
in agreement with their state’s popular vote (with a few exceptions that didn’t
affect the overall outcome).
There is an incredible irony about Trump’s efforts; another
purpose of the Electoral College was to make sure that the President was suitable.
Dare I say, suitably Aristocratic? If the Framer’s view of the College had been
in vogue 4 years ago, it is likely that Trump never would have been President.
I have previously opined that Trump illegally spent funds
on programs that were not funded by Congress, e.g., portions of the border
wall. In his meddling with the electors, we see again that Trump has little
respect for the Constitution; but there is another huge irony here - Trump appointed
2 strict-Constitutionalists to the Supreme Court.
In summary: Subverting the Electoral College is a
desperate and dangerous strategy. At this point, his chances to remain
President appear to be zero.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:30 pm Friday. 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
-Friday the S&P 500 dropped
about 0.7% to 3582.
-VIX rose about 1% to 23.45.
-The yield on the 10-year
Treasury dropped to 0.829%.
Here’s the Friday run-down 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.
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.
-Long-term new-high/new-low data.
-Short-term new-high/new-low data.
-The Fosback High-Low Logic Index is bullish.
-Slope of the 40-dMA of New-highs is rising.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
NEUTRAL
-Bollinger Bands.
-Non-crash Sentiment indicator remains neutral.
-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 10 up-days over the last 20 days.
Neutral
-We’ve seen 5 up-days over the last 10-days. Neutral
-The S&P 500 is about even with the Utilities ETF
(XLU).
-54% of the 15-ETFs that I track have been up over the
last 10-days; not enough to give a signal.
-VIX is falling, but not fast enough to give a signal.
BEAR SIGNS
-RSI was bearish yesterday and remains very high, Friday.
-Breadth on the NYSE compared to the S&P 500 index is
warning of a correction.
-The smoothed advancing volume on the NYSE is falling.
-The Smart Money (late-day action) is bearish. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-My Money Trend indicator has reversed down.
-The S&P 500 is 13.1% 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.
-Only 2.0% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made a new all-time-high on Friday, 13
November.
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 8
bear-signs and 15 bull-signs. Last week, there were 4 bear-signs and 16
bull-signs.
The daily sum of 20 Indicators
declined from +6 to +5 (a positive number is bullish; negatives are bearish).
The 10-day smoothed sum that smooths the daily fluctuations slipped from +114
to +110. (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 to BUY, 9 Nov. Now, Price, and Volume are bullish; Sentiment
& VIX indicators are neutral. The ensemble remains BUY, but that just means
that the market has been strong. It looks like we’re at a top, so I am not
buying yet.
The extreme overbought market
pretty much guarantees that we’ll have a pullback of some kind and it appears
that it has started.
I’ll continue to sit out.
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
FRIDAY 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.
