“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.
JOBLESS CLAIMS (CNBC)
“Jobless claims unexpectedly rose last week as states reimposed coronavirus restrictions as lawmakers struggle to push through new government aid, according to a Labor Department report Thursday. The number of first-time unemployment-benefits filers totaled 885,000 in the week ending Dec. 12...” Story at...
https://www.cnbc.com/2020/12/17/weekly-jobless-claims.html
HOUSING STARTS / PERMITS (CNBC)
“U.S. homebuilding and permits increased solidly in
November, pointing to sustained housing market strength even as the broader
economic recovery is slowing amid a resurgence in new Covid-19 cases and lack
of additional government money. Housing starts rose 1.2%...” Story at...
https://www.cnbc.com/2020/12/17/us-housing-starts-november-2020.html
PHILADLEPHIA FED INDEX (Morningstar News)
“Manufacturing activity in the Philadelphia area slowed
its expansion pace in December for the second consecutive month, data from a
report released by the Federal Reserve Bank of Philadelphia showed Thursday... ‘Manufacturing
activity in the region continued to grow, but growth was less widespread,’ the
Philly Fed said.” Story at
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30pm Thursday. 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
-Thursday the S&P 500 rose
about 0.6% to 3722.
-VIX dropped about 3% to 22.93.
-The yield on the 10-year
Treasury rose to 0.937%.
The daily sum of 20 Indicators declined from +5 to +4 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +49 to 45. (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
switched to BUY, 15 Dec. and it remains BUY. Now, Price & VIX are bullish;
Sentiment & Volume are neutral. Since it appears we are near a top, I will
wait.
Even while the market indicators
are neutral to bullish, the market remains extremely overbought with the
S&P 500 16.8% 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.
I’ll continue to keep a low %
of funds in the stock market until I see a better buying point.
I wouldn’t be surprised to see
a big move higher when the COVID relief bill passes, followed by a sell-off. I’ll
watch the indicators.
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
THURSDAY 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.
