“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.
EIA CRUDE INVENTORY (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.” Report at...
http://ir.eia.gov/wpsr/wpsrsummary.pdf
US GREENHOUSE GAS EMISSIONS FALL FOR 15 YEARS (EIA)
The environmentalists won’t tell you that – they’d be out
of a job.
Chart at...
https://www.eia.gov/todayinenergy/detail.php?id=45836
My cmt: The rest of the world has increased CO2 emissions
significantly over the same time period. Why we would want to participate in Treaties
agreements that put our country at a disadvantage compared to the rest of the
world, but particularly to China and India, is beyond me. The US releases less
than 20% of the total world CO2 (the primary greenhouse gas). If we cut to zero
it won’t cool the planet. (These “agreements” are Treaties that should be ratified
by the Senate. Why the Congress allows the Executive Branch to usurp its power
is also beyond me.)
TEXTBOOK EXAMPLE OF LATE CYCLE (The Felder Report)
“I like to think of markets and securities in terms of
three separate but interrelated dymanics: fundamentals, sentiment and
technicals. Fundamentals include things like earnings, net asset value, how
those things are trending and valuation relative to them. Sentiment is simply
how investors are feeling toward something and technicals are really just a way
to analyze the price trend...Together, these three indicators paint a picture
of an extremely overvalued stock market, driven by a speculative euphoria even
while the price trend is running out of steam. It is the textbook definition of
“late cycle” in the stock market and suggests investors ought to exercise a
great deal of caution towards equities as an asset class.” Commentary at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 8:15 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.
COVID new-case numbers are screaming higher.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500
rose about 0.8% to 3573.
-VIX slipped about 5% to 23.45.
-The yield on the 10-year
Treasury slipped to 0.946%.
The correction is now 49 days
old and the Index is about 0.2% below its prior high. If the S&P 500 closes
above 3581 we’ll have to declare the correction is over. If that happens, the correction
will have been 9.6% top to bottom and only will have lasted 14 trading-days
(top-to-bottom). It will have been an exceptionally short correction with no
test of the prior low. We’ll see.
The daily sum of 20 Indicators
improved from +8 to +10 (a positive number is bullish; negatives are bearish).
The 10-day smoothed sum that smooths the daily fluctuations improved from +32
to +49. (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.
We got a BUY signal from the
5-10-20 Indicator, Friday.
The Long Term NTSM indicator
ensemble switched to BUY, 9 Nov. Now, Price and Volume are bullish; Sentiment
and VIX indicators are all neutral. The ensemble remains BUY.
Today we got a “Breadth Thrust”
indication. Two days ago, the 52-week, New-high/new-low ratio improved by 5.8
standard deviations. These are very bullish indications, but here is a caveat
to the New-high/new-low data. The 40-dMA of new-highs has been falling for the
last three days – that’s a bearish trend indicator.
So, we have even more reliable
buy-signals that are telling me to put more money to work in the stock market.
As I have been cautioning
recently, the one trouble point is: The S&P 500 is 13.9% above its 200-dMA.
(Sell point is 12%.) When the Index gets
this high, it puts a restraint on gains. Markets can go higher, but the
risk/reward is skewed to the downside. Once we see a few more top indicators
turn negative, then we would expect another dip, or continuation of the ongoing
weakness. I say ongoing weakness, because other than some extreme bullishness
around the election, we haven’t managed to break above the 2 Sept high.
I’ll continue to sit out a bit
longer.
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
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained POSITIVE.
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.
