“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.
IHS MARKIT MANUFACTURING / SERVICES PMI – FLASH (Reuters)
“Data firm IHS Markit said on Friday its flash U.S.
manufacturing PMI accelerated to a reading of 59.1 in the first half of this
month, the highest since May 2007, from 57.1 in December...its flash services
sector PMI increased to 57.5 from 54.8 in December, the pace of new business
growth softened at the start of 2021.” Story at...
EXISTING HOME SALES (Yahoo Finance)
“Home sales activity ticked up in the final month of 2020
and annual sales activity reached its highest levels since 2006. Existing home
sales increased 0.7% to 6.76 million in December...” Story at...
https://finance.yahoo.com/news/existing-home-sales-hit-december-2020-150355680.html
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 4.4 million barrels from the
previous week. At 486.6 million barrels, U.S. crude oil inventories are about
9% above the five year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
INVESTOR SURVEY SUGGESTS A TOP (McClellan Financial
Publications)
“NAAIM Exposure Index now stands at 112.93, meaning that
on average the group holds a leveraged long position in the stock market.
This is the second highest weekly reading ever, going back to the start of the
data in 2006. Generally speaking, high readings like this mean that
investors are really bullish, which is a sign of a market top. Even
though these investment managers are professionals, they are still subject to
crowd-like behavior.” – Tom McClellan. Commentary at...
https://www.mcoscillator.com/learning_center/weekly_chart/looking_deeper_at_the_naaim_survey_data/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:50pm Friday.
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
-Friday the S&P 500 slipped
about 0.2% to 3847.
-VIX rose about 0.4% to 21.40.
-The yield on the 10-year
Treasury slipped to 1.086%.
Here’s today’s Friday run-down of some important
indicators. These tend to be both long-term and short-term so they are somewhat
different than the 20 that I report on daily.
BULL SIGNS
-The 10-dMA of stocks advancing on the NYSE
(Breadth) is above 50%
-The 50-dMA % of stocks advancing on the NYSE (Breadth)
is above 50%.
-The 5-10-20 Timer System is BUY; the 5-dEMA and the
10-dEMA are above the 20-dEMA.
-The Fosback High-Low Logic Index is very bullish. (We’ve
seen high new-highs and low new-lows.)
-MACD of S&P 500 price made a bullish crossover 20
January.
NEUTRAL
-Long-term new-high/new-low data flat
-The 100-dMA of the % of stocks advancing on the
NYSE (Breadth) is above 50%. However, it is falling.
-Short-term new-high/new-low data is flat.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means it is leaning bearish.
-Statistically, the S&P 500 gave a panic-signal, 28
October. This usually means more downside to come, but the bear-signal has
expired.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-VIX is relatively flat.
-Bollinger Bands.
-Overbought/Oversold Index (Advance/Decline Ratio).
-6 Jan, the 52-week, New-high/new-low ratio improved by 4.3
standard deviations – very bullish and also rare. Signal has expired.
-We’ve seen 6 up-days over the last 10-days. Neutral.
-There have been 14 up-days over the last 20 days.
Neutral
-The market has broadened out; 6.7% of all issues traded
on the NYSE made new, 52-week highs when the S&P 500 made a new all-time-high
on 8 Jan. (there is no bullish signal for this indicator.)
-RSI.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-My Money Trend indicator is flat.
-51% of the 15-ETFs that I track have been up over the last
10-days – neutral.
-The S&P 500 is outperforming Utilities ETF (XLU),
but the outperformance is falling, so I’ll call this one neutral.
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-The Smart Money (late-day action) is selling. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-Cyclical Industrials (XLI-ETF) are underperforming the
S&P 500.
-McClellan Oscillator is below zero.
-The S&P 500 is 15.5% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is also bearish.
-Slope of the 40-dMA of New-highs is falling, but just
barely.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bearish crossover 21 Jan.
On Friday, 21 February, 2 days after the top of the
Coronavirus pullback, there were 10 bear-signs and 1 bull-sign. Now there are 7
bear-signs and 5 bull-signs. Last week, there were 8 bear-signs and 6
bull-signs.
There was not much change in indicators over the week. The
bull/bear ratio declined slightly, but probably not enough to mean much.
The daily sum of 20 Indicators improved from -4 to -2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +15 to +5. (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
FRIDAY MARKET INTERNALS (NYSE
DATA)
Market Internals slipped to 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.
