“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.
ADP EMPLOYMENT CHANGE (ADP via prnewswire)
“Private sector employment increased by 174,000 jobs from
December to January according to the January ADP® National Employment Report™..."The labor market
continues its slow recovery amid COVID-19 headwinds," said Ahu Yildirmaz,
vice president and co-head of the ADP Research Institute. "Although job
losses were previously concentrated among small and midsized businesses, we are
now seeing signs of the prolonged impact of the pandemic on large companies as
well." Press release at...
IHS MARKIT SERVICES PMI (Morningstar)
“Activity in the U.S. services sector gained momentum in
January amid a strong rise in new business, data from IHS Markit showed
Wednesday. The final reading for the U.S. Services Purchasing Managers' Index
for January came in at 58.3, up from 54.8 in December...” Story at...
ISM MANUFACTURING (ISM via prnewswire)
“Economic activity in the manufacturing sector grew
in January, with the overall economy notching an eighth
consecutive month of growth, say the nation's supply executives in the
latest Manufacturing ISM® Report On Business®..."The
manufacturing economy continued its recovery in January. 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 continuing to
cause strains that limit manufacturing growth potential. However, panel
sentiment remains optimistic...” Press release at...
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the
previous week. At 475.7 million barrels, U.S. crude oil inventories are about
4% above the five year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:30pm Wednesday. 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
-Wednesday the S&P 500 rose about 0.1% to 3830.
-VIX dropped about 10% to 22.95.
-The yield on the 10-year
Treasury rose to 1.146%.
Pullback over? Hard to say. Internals have improved, but still
haven’t turned bullish. The long-term indicator ensemble remains Sell.
If the Index makes a new high, it will be curious to see the
number of new-highs. Today, 4.3% of issues on the NYSE made new-highs. That’s somewhat low.
The 40-dMA of New-highs is currently falling and that’s outright
bearish.
Overall, there were zero new-lows today and that remains
very bullish.
It’s a mixed bag at this point. Daily indicators are
pointing down, but not by much.
The daily sum of 20 Indicators improved from -4 to -2 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations declined from -59 to -61. (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 SELL. Volume & the Panic Indicator are
Bearish., VIX, Sentiment & Price are neutral. The last time my NTSM
Long-Term Indicator was as negative as it was on 29 Jan, was 4 days after the
Coronavirus Top, on 19 February 2020. That’s not a guarantee that we’ll see a
20%-correction, but it is concerning.
S&P 500 (not sure if I should
call this a correction) data:
-Day 7
-S&P 500 down 0.7% from
the top – that’s hardly worth calling it a correction.
-2.7% above the 50-dMA. (The
S&P 500 closed at the 50-dMA.)
-13.8% above the 200-dMA.
(Bearish again.)
Avg Length of < 10%
Corrections: 33-trading days
Avg Length of > 10%
Corrections: 61-trading days (ignoring major crashes)
We’re still due for a down day. Let’s see what happens
tomorrow. The Index remains stretched too far above its 200-dMA.
I am still conservatively positioned.
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
WEDNESDAY 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.
