“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.
PAYROLL REPORT / UNEMPLOYMENT RATE (Yahoo Finance)
“U.S. job growth turned
negative for the first time since April in the final month of
2020, as the pandemic that rocked the
economy over the past year dealt yet another blow to the labor
market...Change in
non-farm payrolls: -140,000 vs. +50,000 expected and a
revised +336,000 in November...Unemployment rate: 6.7% vs. 6.8%
expected and 6.7% in November...” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:30pm 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.
Record new cases today are shockingly high.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose
about 0.6% to 3825.
-VIX dropped about 4% to 21.56.
-The yield on the 10-year
Treasury rose to 1.12%.
I haven’t done the Friday run-down since the Holidays; 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
-Long-term new-high/new-low data. (Headed higher, but it
is stretched to extremes.)
-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 100-dMA of the % of stocks advancing on the
NYSE (Breadth) is above 50%. However, it leveled off today.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-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.)
-VIX is falling.
-Slope of the 40-dMA of New-highs is rising.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bullish crossover 7 Jan.
-MACD of S&P 500 price made a bullish crossover 7
January.
-McClellan Oscillator is above zero.
-6 Jan, the 52-week, New-high/new-low ratio improved by 4.3
standard deviations – very bullish and also rare.
-The smoothed advancing volume on the NYSE is rising.
-The S&P 500 is 17% above its 200-dMA. (Sell point is
12%.) When Sentiment is considered, the signal is also bearish. (It hasn’t been
this high since Oct 2009.)
-The S&P 500 is outperforming Utilities ETF (XLU).
-65% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Short-term new-high/new-low data is flat; let’s say
neutral.)
-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.
-There have been 12 up-days over the last 20 days.
Neutral
-We’ve seen 8 up-days over the last 10-days. Neutral, but
leaning bearish.
-The market has broadened out; 10.1% 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.
-Bollinger Squeeze has expired, but Bollinger Bands are
bearish.
-My Money Trend indicator is flat.
BEAR SIGNS
-Bollinger Bands.
-The Smart Money (late-day action) is mixed. This
indicator is based on the Smart Money Indicator (a variant of the indicator
developed by Don Hayes).
-Overbought/Oversold Index (Advance/Decline Ratio).
-Breadth on the NYSE compared to the S&P 500 index is
warning of a correction at any time.
-Cyclical Industrials (XLI-ETF) are underperforming the
S&P 500.
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 5
bear-signs and 17 bull-signs. December 8, there were 9 bear-signs and 10
bull-signs.
So, we see a lot of improvement recently in these
indicators and also compared to before the Holiday. I see some of this as over-exuberance.
This seems to be a buy everything moment as we head for a blow-off top.
The daily sum of 20 Indicators declined from +8 to +5 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations improved from +10 to +17. (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 remains BUY. Now, Price & Volume are Bullish; 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 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.
