“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.
JOBLESS CLAIMS (CNBC)
“First-time filings for unemployment insurance were
little changed over the past week despite other indicators that the labor
market weakened at the end of the 2020. Weekly claims totaled 787,000 for the
week ended Jan. 2, the Labor Department reported Thursday.” Story at...
https://www.cnbc.com/2021/01/07/weekly-jobless-claims.html
ISM NON-MANUFACTURING (ISM)
“The Services PMI™ registered 57.2 percent, 1.3 percentage
points higher than the November reading of 55.9 percent. This reading
represents a seventh straight month of growth for the services sector, which
has expanded for all but two of the last 131 months... Respondents’ comments
are mixed about business conditions and the economy. Various local- and
state-level COVID-19 shutdowns continue to negatively impact companies and
industries. Applicable human resources, production capacity and logistics have
been more constrained than during the previous month. Most respondents are
cautiously optimistic about business conditions with the recent approval and
impending distribution of vaccines,” says Nieves [Anthony Nieves, CPSM, C.P.M.,
A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®)
Services Business Survey Committee]
Press release at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:15pm 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 1.5% to 3804.
-VIX dropped about 10% to 22.6.
-The yield on the 10-year
Treasury rose to 1.084%.
I had a typo in my Trump comments in yesterday’s blog. The
correct date of my prior comment was 21 December, not 21 October.
Still no clear top-signal
today. We see some top indicators, but RSI is not overbought and there are still
not enough warning signals yet. I have been surprised that the S&P 500 has
managed to climb 5% higher after getting stretched 15% above its 200-dMA.
Today, the market remains overbought with the S&P 500 16.6% above its
200-dMA. This still suggests that the downside risk is greater than the upside
risk.
We do note that there have been only 2 down-days in the
last 2 weeks. That suggests a down-day
for Friday, but the numbers are not as bad over the last month, so this isn’t a
correction signal yet.
The daily sum of 20 Indicators improved from +1 to +8 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +1 to +10. (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 improved to BUY. Now, Price & Volume are Bullish; VIX &
Sentiment are neutral. I still think we are near a short-term top. 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
THURSDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained POSITIVE 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.
