“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.
The NYSE is open tomorrow, Veterans Day. Remember a VET.
I’ll think of my uncle, Jesse Hartwell Heath, VMI Class of 1938, died in Belgium
on Jan. 3, 1945. – before I was born.
NFIB SMALL BUSINESS OPTIMISM (Banking Journal)
"The NFIB Small Business Optimism Index remained unchanged
in October, measuring 104 points. While business conditions have improved, many
respondents reported increased uncertainty driven by the elections and
uncertain conditions in future months due to the ongoing COVID-19 pandemic.”
Story at...
https://bankingjournal.aba.com/2020/11/small-business-optimism-remains-unchanged-in-october/
JOLTS JOB OPENINGS (Reuters)
“U.S. job openings increased less than expected in
September while hiring fell, suggesting the labor market recovery was petering
out even before a resurgence in new COVID-19 cases which is expected to slow
momentum.” Story at...
BULL TARGETS (Northman Trader)
“There are now no more gaps to fill to the upside, but
now nothing but a large array of gaps to the downside to fill for this rally
off of the March lows is defying all technical history. It is entirely built on
gaps that are unfilled. Some gaps may never fill or may take years to fill is
generally the technical experience, but this here, a market so reliant on some
many open gaps is entirely without precedence...There is no market history that
shows such price action to be sustainable or even desirable...I don’t know how
many of these gaps below will fill, but my technical sense is quite a few in
due time and quite a few of them may even fill before the end of 2020.” Sven
Henrich, Northman Trader. Commentary at...
https://northmantrader.com/2020/11/09/bull-targets/
When a stock opens higher or lower than the previous day,
a gap is created on the charts. Traders believe those gaps must be filled (the
market must return to those levels). With the only remaining open gaps below
current levels, a drop is likely, according to Mr. Henrich.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 6:30 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.
COVID new-case numbers are screaming higher. This doesn’t
seem to be a typo.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose
about 0.1% to 3546.
-VIX slipped about 4% to 24.8.
-The yield on the 10-year
Treasury rose to 0.979%.
Tuesday, the DJI was up nearly
1%; the S&P 500 was Down 0.1%; The NASDAQ Composite was down 1.4%. NASDAQ
has been underperforming for about a week. Looking at the Dow 30, the tech
stocks (AAPL, CSCO, INTEL, MSFT, CRM) have all under-performed. Here’s a chart
of DOW gains in the last 2-months.
Is this a rotation out of tech?
Looks like it. Tech is generally weaker
in late-phases of the Business Cycle, so this is a concern.
The daily sum of 20 Indicators
declined from +14 to +8 (a positive number is bullish; negatives are bearish).
The 10-day smoothed sum that smooths the daily fluctuations improved from +17
to +32. (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 48 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 switched to
BUY, 9 Nov.
Now, Price and Volume are bullish;
Sentiment and VIX indicators are all neutral. The ensemble remains BUY.
So, we have several reliable buy-signals
that are telling me to put more money to work in the stock market. The one
trouble point is: The S&P 500 is 13.1% 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.
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
TUESDAY 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.
