“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.
My cmt: The 2 Sept high was 3581, so it looks like
David einhorn was too early.
GDP (Yahoo news)
“The U.S. economy expanded at a record 33.4% annual pace
from July through September, the Commerce Department said Tuesday, delivering
the last of three estimates on the economy’s third-quarter performance.” Story
at...
https://news.yahoo.com/u-slightly-upgrades-gdp-estimate-133753503.html
CONSUMER CONFIDENCE (Conference Board via prnewswire)
“The Conference Board Consumer Confidence
Index® declined in December, after decreasing in November. The Index now
stands at 88.6 (1985=100), down from 92.9 in November. The Present Situation
Index – based on consumers' assessment of current business and labor market
conditions – decreased sharply from 105.9 to 90.3. However, the Expectations
Index – based on consumers' short-term outlook for income, business, and labor
market conditions – increased from 84.3 in November to 87.5 this month...
"Consumers' assessment of current conditions deteriorated sharply in
December, as the resurgence of COVID-19 remains a drag on confidence,"
said Lynn Franco, Senior Director of Economic
Indicators at The Conference Board.” Press release at...
EXISTING HOME SALES (CNBC)
“After five consecutive months of gains, closed sales of
existing homes turned lower in November.
They fell 2.5% on a month-to-month basis to a seasonally
adjusted annualized rate of 6.69 million units, according to the National
Association of Realtors. Sales were a strong 25.8% higher from a year earlier.” Story at...
2020 – A YEAR OF SPECULATIVE MANIA (Real Investment
Advice)
“The markets are indeed currently exceedingly exuberant
on many fronts. With margin debt back near peaks, stock prices at all-time
highs, and “junk bond yields” near record lows, the bullish media
continues to suggest there is no reason for concern. Of course, such should not
be a surprise. At market peaks – ‘everyone’s in the pool.’
‘The investor’s chief problem – and even his worst enemy
– is likely to be himself.’ – Benjamin Graham” Commentary at...
https://realinvestmentadvice.com/technically-speaking-charting-2020-a-year-of-speculative-mania/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:50pm 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.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500
slipped about 0.2% to 3687.
-VIX rose about 4% to 24.23.
-The yield on the 10-year
Treasury slipped to 0.920%.
Not much change from yesterday.
The daily sum of 20 Indicators improved from -2 to -1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +28 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 Long Term NTSM indicator
ensemble improved to BUY, 22 Dec. Now, Price & VIX are bullish; Sentiment &
Volume are neutral. Since I think the market is near a top, I will wait.
The market remains overbought
with the S&P 500 15.3% above its 200-dMA. If past history follows, that
tends to cap the gains going forward and suggest that the downside risk is
greater than the upside risk.
Is this the beginning of a sell-off? There are a few more
signs of a small downturn, but I doubt that much will happen before the Holidays
are over.
I’ll continue to keep a low %
of funds in the stock market until I see a better buying point.
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 NEUTRAL on the market.
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.
The markets have not
retested the lows on recent corrections and that has left me under-invested on
the bounces. I will need to put less reliance on retests in the future.
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 a correction is deep
enough, 80% would not be out of the question.
