“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.
My cmt: Based on the above number, the debt is about $85,000 per person. Thank-you,
“GW” Bush, Obama, Trump. Clinton managed to balance the budget, for the most
part. The others made no attempt.
ISM MANUFACTURING (Institute for Supply Management)
“The December Manufacturing PMI® registered 60.7
percent, up 3.2 percentage points from the November reading of 57.5 percent.
This figure indicates expansion in the overall economy for the eighth month in
a row after contracting in March, April, and May, which ended a period of 131
consecutive months of growth... “The manufacturing economy continued its
recovery in December. Survey Committee members reported that their companies
and suppliers continue to operate in reconfigured factories, but absenteeism,
short-term shutdowns to sanitize facilities and difficulties in returning and
hiring workers are causing strains that are limiting manufacturing growth
potential. However, panel sentiment remains optimistic (three positive comments
for every cautious comment), an improvement compared to November.” Press
release at...
S&P 500 TRADING AT HISTORICAL EXTREMES - EXCERPT
(Real Investment Advice)
“Welcome to 2021. As we kick off a new year, we begin
with the S&P 500 trading at historical extremes. It is essential to have
some perspective to set reasonable expectations for future returns and quantify
the “risk” of
something going wrong...“Currently, Wall Street analysts are wildly exuberant on
expectations of explosive economic growth, rising interest rates, and
inflation. The problem with those expectations is that in an economy that is
$85 Trillion in debt, higher rates and inflation are a ‘death knell’ to
economic growth. Yes, while the Fed may come to the rescue with more QE, with
markets already trading at 36x times earnings it is becoming increasingly
difficult to justify overpaying for earnings. Eventually, corporate earnings
are going to have to markedly improve, or prices will revert.” Commentary at
https://realinvestmentadvice.com/technically-speaking-sp-500-trading-at-historical-extremes/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:30pm Tuesday. 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
-Tuesday the S&P 500 rose
about 0.7% to 3727.
-VIX slipped about 6% to 25.34.
-The yield on the 10-year
Treasury rose to 0.955%.
More of the same. Indicators deteriorated some more. Perhaps we’ve seen a short-term top, but I
don’t see a smoking gun.
The daily sum of 20 Indicators declined from -3 to -7 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +5 to -2. (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. Now, Price VIX, Sentiment & Volume are neutral.
The market remains overbought
with the S&P 500 14.7% 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.
For more details, see NTSM
Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals improved 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.
