“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.
NFIB SMALL BUSINESS OPTIMISM (NFIB)
“The NFIB Small Business Optimism Index declined 5.5
points in December to 95.9, falling below the average Index value since 1973 of
98. Nine of the 10 Index components declined and only one improved...This
month’s drop in small business optimism is historically very large and most of
the decline was due to the outlook of sales and business conditions in 2021,”
said NFIB Chief Economist Bill
Dunkelberg. ‘Small businesses are concerned about
potential new economic policy in the new administration and the increased
spread of COVID-19 that is causing renewed government-mandated business
closures across the nation.’” Press release at...
https://www.nfib.com/surveys/small-business-economic-trends/
JOLTS – JOB OPENINGS (Reuters)
“U.S. job openings fell moderately in November, but
mounting layoffs amid rampant COVID-19 infections supported views that the
labor market recovery from the pandemic was stalling... Job openings, a measure
of labor demand, dropped 105,000 to 6.527 million on the last day of November.”
Story at
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as of 6:00pm 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 1 pt. to 3801.
-VIX slipped about 3% to 23.33.
-The yield on the 10-year
Treasury slipped to 1.134%.
The S&P 500 remains stretched; it is now 15.8% above
its 200-dMA. The Index also remains stretched too far ahead of all stocks on
the NYSE, a measure of breadth. Otherwise, I don’t see a lot of top warnings.
Indicators have drifted down over the last day or two, but that is hardly a
sign of trouble – we’d need to see a lot more negative signs before we finally
can expect a market retreat.
The 10-year Bond yields are rising. That might be a problem for the markets, but
I can’t guess when.
The daily sum of 20 Indicators declined from +1 to -1 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +15 to +11. (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, Volume, 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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained 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.
