“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.
WHEN THE DUCKS QUACK – FEED THEM (Heritage Capital)
“Now may be a better opportunity to feed the ducks as
they are quacking. In other words, investors are hungry for stocks this week
when they were vomiting them up last week. Selling into this rally may not be a
bad idea in the short-term.” – Paul Schatz, President, heritage Capital. Story
at...
https://investfortomorrow.com/blog/fed-day-back-to-business/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 8:10 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.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose
about 1.2% to 3551.
-VIX rose about 4% to 25.75. (The
Option Players didn’t like the afternoon drop.)
-The yield on the 10-year
Treasury was 0.918%.
I thought this would be an
easy commentary. The S&P 500 was up
over 3% in the morning and headed for the moon. It looked like an easy “blow-off-top”
call. That was not to be. Investors wised-up after 1pm and the Index dropped
like a stone, especially from 3 pm into the close. It would appear the Pros are
concerned about a stretched market.
Today was another
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 obviously not all
statistically-significant, up-days occur at tops.
The daily sum of 20 Indicators
rose from +9 to +14 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that smooths the daily fluctuations improved from -6 to +17.
(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 47 days
old and the Index is about 1% 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.
We got a BUY signal from the
5-10-20 Indicator, Friday. The Long Term NTSM indicator ensemble improved and switched
to BUY today, 9 Nov. Price and Volume are bullish; Sentiment and VIX indicators
are all neutral.
The S&P 500 is 13.3% above
its 200-dMA. (Sell point is 12%.) Even
so, I can’t call a top now with any confidence. There aren’t that many top
indicators in bearish territory.
With so many bullish
indicators it is hard to remain bearish, but I guess I’m in danger of becoming
a “perma-Bear.” The Index could rise another 5% or so, but it’s not as likely
as another dip. 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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY MARKET INTERNALS (NYSE
DATA)
Market Internals slipped to 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.
