“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.
ISM MANUFACTURING (CNBC)
“U.S. manufacturing activity accelerated in October, with
new orders jumping to their highest level in nearly 17 years amid a shift in
spending toward goods like motor vehicles as the Covid-19 pandemic drags on.”
Story at...
https://www.cnbc.com/2020/11/02/ism-manufacturing-october-2020.html
CONSTRUCTION SPENDING (Reuters)
“U.S. construction spending increased less than expected
in September as gains in investment in private-sector projects were partially
offset by a decline in public outlays. The Commerce Department said on Monday
that construction spending rose 0.3% in September.” Story at...
https://www.reuters.com/article/instant-article/idUSL1N2HL2CR
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:50 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 3210.
-VIX dipped about 2% to 37.13.
-The yield on the 10-year Treasury slipped to 0.857%.
The S&P 500 made a nice bounce higher today. The
S&P 500 pushed against the 100-dMA (3311), but closed just below it at
3310. The 100-dMA is resistance, so we’ll see if the Index can break thru in the
next several sessions.
Utilities (XLU) outpaced the S&P 500 today – looks like
some sophisticated investors are still worried about the ongoing correction.
The daily sum of 20 Indicators improved from -6 to -2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from -62 to -60. (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 42 days old and the Index is 7.6%
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.
The Long Term NTSM indicator ensemble switched from HOLD
to SELL, 26 Oct. It remains Sell. (Volume, VIX and the Panic Indicator are
bearish.) The previous Sell signal was on 24 September.
I remain bearish. Indications are that Friday was NOT a
bottom. It’s possible that we are near a bottom, but I still want to see a
retest of the low so we can have confidence to make a call to Buy. So far, Mr.
Market has not obliged.
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
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
improved to 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.
