“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 (Markit Economics)
“The seasonally adjusted IHS Markit final U.S.
Manufacturing Purchasing Managers’ Index™ (PMI™) posted 57.1 in December, up
from 56.7 in November, to signal the steepest improvement in the health of the
U.S. manufacturing sector for over six years. The headline figure was also up
from the earlier released 'flash' reading of 56.5.” Press release at...
https://www.markiteconomics.com/Public/Home/PressRelease/09b26f3d6bbd42308734b4a196abaa5e
CONSTRUCTION SPENDING
National nonresidential construction spending
fell 0.6% in November 2020, according to an Associated Builders and Contractors analysis of data
published today by the U.S. Census Bureau...Ten of the sixteen nonresidential
subcategories saw decreased spending on a monthly basis. Private nonresidential
spending fell 0.8%, while public nonresidential spending fell 0.2% in November.”
Story at...
CASS FREIGHT INDEX (CASS Information Systems)
“The shipments component of the Cass Freight Index®
accelerated to 2.7% y/y growth in November 2020, after turning positive in
October for the first time in almost two years. The acceleration was more than
explained by an easier prior year comparison, as the Cass Shipments Index fell
2.2% in November from the October level. Seasonally adjusted (SA), the m/m
decline was a narrower 1.0%. This small sequential pullback followed five
consecutive months of strong recovery averaging 5.0% sequential improvement
(SA), and is likely due to the worsening pandemic numbers impacting the
trajectory of the recovery in November.”
Press release at...
https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/november-2020#freight
CAREFUL WHAT YOU WISH FOR [excerpt] (Heritage Capital)
“As I have been discussing for the past week or so, the
trend is for stocks to gently and mildly drift higher into 2021. In that regard
2020 has been very typical. As the calendar turns I expect volatility to
pick up as we usually see one big up day over the first three days with the
opportunity for a more substantial pullback after that.” Full Commentary at...
https://investfortomorrow.com/blog/calendar-finally-turning-to-2021-careful-what-you-wish-for/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 8:00pm 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 dropped
about 1.5% to 3701.
-VIX slipped about 0.1% to 26.97.
-The yield on the 10-year
Treasury rose to 0.920%.
It’s probably too early to say that a correction has
started. One day does not make a trend.
I suspect a lot of investors were sitting on big profits that they wanted to
defer until 2021. With the markey stretched, as I have been writing about for
some time, Monday was a good a time to lock in some profits. Boeing was down
5.3% on the day, but it had been up 36% over the last 2-months of the year. As
one might expect on a down day, indicators did dip some.
The daily sum of 20 Indicators declined from +3 to -3 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +12 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 declined to HOLD. Now, Price VIX, Sentiment & Volume are neutral.
Today was a statistically-significant, down-day so we may
expect an up-day Tuesday. It’s true about 60% of the time.
The market remains overbought
with the S&P 500 14.2% 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.
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY 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.
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.
