“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.
EARNINGS (FACTSET)
“At this point in time, more S&P 500 companies are
beating EPS estimates for the fourth quarter than average, and beating EPS
estimates by a wider margin than average. As a result, the index is reporting
higher earnings for the fourth quarter today relative to the end of last week
and relative to the end of the quarter. Despite the increase in earnings, the
index is still reporting a year-over-year decline in earnings, mainly due to
the negative impact of COVID-19 on a number of industries within the index.
But, if earnings continue to surpass estimates at current levels, it is likely
the index will report year-over-year earnings growth for the quarter for the
first time since Q4 2019.” Analysis at...
https://insight.factset.com/sp-500-earnings-season-update-january-22-2021
BIDEN’S STIMULUS WILL INFLATE THE BUBBLE EVEN MORE
(Business Insider)
“Legendary investor Jeremy Grantham warned investors
during a Bloomberg interview that the $1.9 trillion in federal aid President
Joe Biden is seeking from Congress will further inflate the stock market
bubble...When you have reached this level of obvious super-enthusiasm, the
bubble has always, without exception, broken in the next few months, not a few
years," Grantham told Bloomberg. Story at...
ANOTHER SIGN THE MARKETS HAVE GONE NUTS (MarketWatch)
“This spike in margin debt over the past few months is
another sign that markets have gone nuts, and everyone is chasing everything,
regardless of what it is, whether it’s a penny stock with a similar name to
something [Tesla Chief Executive] Elon Musk mentioned in a tweet, or whether
it’s Tesla’s stock itself, or any of the EV [electric-vehicle] makers or
presumed EV makers that might never mass-produce EVs, or even a legacy auto
maker that is now touting its EV investments, or whatever it is, including
bitcoin — which exploded higher, before plunging 28% in two weeks.” Story
at...
CREDIT BUBBLE WEEKLY COMMENTARY EXCERPT (The Credit
Bubble Bulletin)
“My biggest fear is materializing. When this historic
Bubble bursts, a major crisis will unfold with our nation’s finances in
complete shambles. The Fed’s “money printing” operation has gone parabolic as
it desperately attempts to sustain an unsustainable Bubble. Treasury debt
growth has gone parabolic as Washington tries to sustain an unsustainable
economic structure. The system is on a trajectory that ensures a crisis of
confidence – and I don’t see this as some long-term concern. This is an issue
of short-term sustainability...” – Doug Noland.
...Bloomberg (Michael Msika): “Bank of America Corp.
strategists warned the ‘extreme rally’ on Wall Street that has pushed stocks to
record highs, fueled by strong U.S. policy stimulus, is forming a bubble in
asset prices. ‘D.C.’s policy bubble is fueling Wall St’s asset price bubble,’
strategists led by Michael Hartnett wrote… ‘When those who want to stay rich
start acting like those who want to get rich, it suggests a late-stage
speculative blow-off.’ The strategists predict a market correction and for
positioning to peak in the first quarter, with the BofA Bull & Bear
Indicator closing in on a ‘sell signal.’” Commentary at...
http://creditbubblebulletin.blogspot.com/
THE BOOM IN FRAUD – WHAT IT SAYS ABOUT THE CURRENT MARKET
(The Felder Report)
“...how much fraud is yet to be uncovered? It took the
Dotcom bust to reveal Enron and Worldcom as frauds. It took the Great Financial
Crisis to reveal rampant mortgage fraud and the Bernie Madoff fraud...we won’t
know the full extent [of fraud in this cycle] until the next major bear market
arrives. However, I think it’s already clear that the level of greed stimulated
during the current mania is, like many other things right now, unprecedented.”
Commentary at...
See Jesse Felder’s blog for examples of recent fraud.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 8:20pm 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 0.4% to 3855.
-VIX rose about 6% to 23.19.
-The yield on the 10-year
Treasury closed at 1.043%.
Monday was a split day for the Indices:
UP: NASDAQ, S&P 500
DOWN: DJIA, Russell 2000, NYSE Composite.
More stocks were down than up.
The S&P 500 closed 15.8% above its 200-dMA. A clear
bearish sign. RSI finally moved very close to a sell. Volume was huge today - frenzied comes to mind.
Bollinger Bands are not now a sell, but they are close. Looks like we are close
to an intermediate top. When RSI and
Bollinger bands are overbought, we may finally see some retreat in the markets.
I have 10 indicators focused on top/bottom calls. The only indicator warning of a top is the %-above the 200-dMA.The New-high/New-low indicators (long-term and short-term) are actually giving Buy-signals so there are now more bottom-signals than top-signals! The New-High/New-Low data will need to get closer to reality, too, before we see a drop.
The daily sum of 20 Indicators declined from -2 to -6 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +5 to -6. (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 remained HOLD. Volume, 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
MONDAY 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.
