“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-ADV (CNBC)
“Gross domestic product, or the sum of all goods and
services produced, increased at a 4% pace in the fourth quarter, slightly below
the 4.3% expectation from economists surveyed by Dow Jones.” Story at...
JOBLESS CLAIMS (Fox Business)
“Figures released Thursday by the Labor Department show
847,000 Americans filed first-time jobless claims in the week ended Jan.
23, slightly lower than the 875,000 forecast by Refinitiv economists.”
Story at...
https://www.foxbusiness.com/economy/jobless-claims-coronavirus-pandemic-jan-23-2021
LEADING ECONOMIC INDICATORS (Conference Board via PR News
Wire)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. increased 0.3 percent in December to 109.5 (2016 = 100),
following a 0.7 percent increase in November and a 0.9 percent increase in
October. "The US LEI's slowing pace of increase in December suggests that
US economic growth continues to moderate in the first quarter of 2021.” Press
release at...
NEW HOME SALES (MarketWatch)
“Sales of newly built homes occurred at a
seasonally-adjusted annual rate of 842,000 in December...Compared to 2019,
December’s numbers were up roughly 15% year-over-year.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:45pm 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 1%% to 3787.
-VIX dropped up about 18% to 30.21.
-The yield on the 10-year
Treasury rose to 1.050%.
Couple of bearish signs that showed up today:
-The Russell 200 had been leading the markets; today it
was the only loser of the major indices.
-S&P 500 peaked at a 2% gain at 1pm and gave back 1%
in the afternoon.
-The S&P 500 is still 13.2% above its 200-dMA.
The daily sum of 20 Indicators declined from -9 to -12 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations declined from -18 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 Long Term NTSM indicator
ensemble remained SELL. Price, Volume & VIX are Bearish. Sentiment is neutral.
During QE the Long-Term indicator sell-signals did not give great results,
since it often warned when pullbacks were very small. At that time, I put a limiter on the
Long-Term Indicator preventing sell signals when the market was down less than
5%. I have since taken the limiter off. This time, I still suspect we have
further to go, but the FED could always embolden the Dip-Buyers.
S&P 500 “correction” data,
if we are in one:
-Day 3
-Down 1.8% from the top –
that’s hardly worth calling it a correction.
-2% above the 50-dMA
We got the big bounce Thursday,
but I doubt that the pullback is over.
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, because Advancing
volume was high. Otherwise, this indicator would have been SELL.
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.
