“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.
PPI (Bloomberg)
“Prices paid to U.S. producers rose less than expected in
December as the pandemic continued to limit pricing power at the end of 2020. The
producer price index for final demand climbed 0.3% from a month earlier after a
0.1% gain in November...” Story at...
RETAIL SALES (Reuters)
“U.S. retail sales fell for a third straight month in
December amid job losses and renewed measures to slow the spread of COVID-19,
further evidence that the economy lost speed at the end of 2020... Retail sales
dropped 0.7% last month...” Story at...
https://www.reuters.com/article/us-usa-economy/u-s-retail-sales-fall-again-in-december-idUSKBN29K1NS
EMPIRE STATE MANUFACTURING (Morningstar)
“Manufacturing activity in New York state expanded in
January at a softer pace than that of the previous month, data from the Federal
Reserve Bank of New York showed Friday.
The Empire State Manufacturing Survey's general business
conditions index decreased to 3.5 in January from 4.9 in December.” Story at...
INDUSTRIAL PRODUCTION (ABC News)
“U.S. industrial production rose 1.6% in December, a
third straight monthly gain, but remains below its pre-pandemic level.” Story
at...
https://abcnews.go.com/US/wireStory/us-industrial-production-jumps-16-december-75275546
UNIV MICHIGAN CONSUMER SENTIMENT (Reuters)
“U.S. consumer sentiment dipped in early January as
Americans reacted to the assault on the Capitol building in Washington and a relentless
surge in COVID-19 infections and deaths, weighing on the economic outlook, the
University of Michigan said on Friday.” Story at...
CAN THE SENATE HOLD A TRIAL AFTER TRUMP LEAVES OFFICE? (Washington
Post)
“Some scholars, most prominently former federal appeals court judge J. Michael Luttig, have argued
that because Trump’s term will have already ended and he, by definition, cannot
be removed, the impeachment power no longer applies. With all respect, I
disagree...If an impeachable officer became immune from trial and conviction
upon leaving office, any official seeing conviction as imminent could easily
remove the prospect of disqualification simply by resigning moments before the
Senate’s anticipated verdict. The clear weight of history, original
understanding and congressional practice bolsters the case for concluding that
the end of Donald Trump’s presidency would not end his Senate trial.” - Laurence H.
Tribe, Carl M. Loeb University Professor Emeritus at Harvard
Law School. Commentary at...
My cmt: I heard Professor Brad Jacob, Constitutional
Expert and Professor of Law at Regent University, make the same argument this
morning on Tony Macrini’s radio program on WNIS-790. Professor Jacob said as
long as the House impeached a President before he left office (as it did Trump),
a trial could proceed after Inauguration. It would not be moot, since
conviction could carry a prohibition preventing Trump from holding future
office.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00pm 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.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 dipped
about 0.7% to 3768.
-VIX rose about 5% to 24.34.
-The yield on the 10-year
Treasury fell to 1.090%.
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
-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 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.)
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bullish crossover 7 Jan.
-The smoothed advancing volume on the NYSE is rising.
NEUTRAL
-Long-term new-high/new-low data flat
-The 100-dMA of the % of stocks advancing on the
NYSE (Breadth) is above 50%. However, it is falling.
-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.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not enough to send a signal.
-VIX is relatively flat.
-Bollinger Bands.
-Overbought/Oversold Index (Advance/Decline Ratio).
-6 Jan, the 52-week, New-high/new-low ratio improved by 4.3
standard deviations – very bullish and also rare. Signal has expired.
-There have been 12 up-days over the last 20 days.
Neutral
-We’ve seen 6 up-days over the last 10-days. Neutral.
-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.
-The S&P 500 is outperforming Utilities ETF (XLU),
but the outperformance is falling sharply, so I’ll call this one neutral.
-55% of the 15-ETFs that I track have been up over the
last 10-days.
BEAR SIGNS
-MACD of S&P 500 price made a bearish crossover 15
January.
-The Smart Money (late-day action). This indicator is
based on the Smart Money Indicator (a variant of the indicator developed by Don
Hayes).
-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.
-McClellan Oscillator is below zero.
-My Money Trend indicator is headed down.
-The S&P 500 is 14.2% above its 200-dMA. (Sell point
is 12%.) When Sentiment is considered, the signal is also bearish.
-Slope of the 40-dMA of New-highs is falling as of today.
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 8
bear-signs and 6 bull-signs. Last week, there were 5 bear-signs and 17
bull-signs.
So, we see a big drop in the bull-indicators with a
relatively small increase in bear-indicators. 8-bear and 6-bull signs doesn’t
seem to be a clear indication of a correction, but the bull/bear ratio is
trending down.
The daily sum of 20 Indicators declined from +4 to -5 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +14 to +6. (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, Volume, Price, 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
We note the banks have moved
into 1st and 2nd place in DOW momentum. I lean toward JPM
due to its higher dividend yield, 2.6%. Bank should do well as interest rates rise,
although I’d expect rates to fall if we see a decent pullback.
FRIDAY MARKET INTERNALS (NYSE
DATA)
Market Internals dropped 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.
