“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 early.
CONSUMER PRICE INDEX (Reuters)
“U.S. consumer prices increased solidly in December amid
a surge in the cost of gasoline, though underlying inflation remained tame as
the economy battled a raging COVID-19 pandemic that has weighed on the labor
market and services industry.” Story at...
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 3.2 million barrels from the
previous week. At 482.2 million barrels, U.S. crude oil inventories are about
8% above the five-year average for this time of year.” Story at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
FED BEIGE BOOK (Reuters)
“U.S. economic activity increased modestly in recent
weeks and a growing number of the Federal Reserve’s districts saw a drop in
employment as a surge in coronavirus cases led to more shutdowns of businesses,
the U.S. central bank said on Wednesday...“Although the prospect of COVID-19
vaccines has bolstered business optimism for 2021 growth, this has been
tempered by concern over the recent virus resurgence and the implications for
near-term business conditions,” the Fed noted in the report.” Story at...
EXTREME NASDAQ VOLUME – BLOW OFF TOP UNDERWAY (McClellan
Financial Publications)
“We are seeing some wild numbers for Nasdaq share volume
lately, much bigger than anything in recent years. This points to a
speculative blowoff underway.” Commentary at...
https://www.mcoscillator.com/learning_center/weekly_chart/extreme_point_for_nasdaq_volume/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:30pm Wednesday. 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
-Wednesday the S&P 500
rose about 0.2% to 3810.
-VIX slipped about 5% to 22.21.
-The yield on the 10-year
Treasury slipped to 1.087%. (Yields fell 2 days in a row. Perhaps the Bond
Ghouls are worried about a stock pullback?)
Today, we had
extremely high, unchanged-volume. Some feel that when the NYSE volume is high
for stocks sold without a change in price, it signals investor confusion and a
possible turning point. I’ve tried to
develop an indicator based on this without much success. Sometimes it’s true; sometimes not. Unchanged-volume
was high at the top on 2 September before a 10% pullback, but it has been
higher since then with no pullback.
The S&P 500 remains stretched; it is now 15.9% above
its 200-dMA. The Index also remains stretched too far ahead of all stocks on
the NYSE, a measure of breadth. Otherwise, I don’t see a lot of top warnings,
so we still don’t have a smoking gun.
The daily sum of 20 Indicators improved from -1 to +3 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +11 to +13. (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. Now, Volume is bullish along with the big improvement
in new-high/new-low data last week. Price, VIX & Sentiment are neutral. I
still think we are near a short-term top based on % over the 200-dMA and a
couple of other indicators.
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
We note the banks have moved
into 1st and 2nd place in DOW momentum. I lean toward JPM
due to its higher dividend yield, 2.6%. Bank should do well as interest rates
rise, although I’d expect rates to fall if we see a decent pullback.
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
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.
