“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
“This country was founded by the bayonet; it survives by
the ballot. Those who falsely disparage
the honesty of our elections are striking a blow at the foundations of our
nation and should be charged with sedition.” – Meade Stith
LEADING ECONOMIC INDICATORS-LEI (Conference Board via
PRnewswire)
“The Conference Board Leading Economic Index® (LEI) for
the U.S. increased 0.5 percent in January to 110.3 (2016 = 100), following
a 0.4 percent increase in December and a 0.9 percent increase in November.
"While the pace of increase in the U.S. LEI has slowed since
mid-2020, January's gains were broad-based and suggest economic growth
should improve gradually over the first half of 2021," said Ataman
Ozyildirim, Senior Director of Economic Research at The Conference Board."
Press release at...
EARNINGS (FACTSET)
“Overall, 83% of the companies in the S&P 500 have
reported actual results for Q4 2020 to date. Of these companies, 79% have
reported actual EPS above estimates, which is above the five-year average of 74%...Given
the unusually strong performance of actual earnings relative to analyst
estimates and the improvement in the earnings growth rate over the past few
weeks, how has the market responded to positive EPS surprises during the Q4
earnings season?
Companies that have reported positive earnings surprises
for Q4 2020 have seen a decline in price of -0.1% on average two days before
the earnings release through two days after the earnings release. This
percentage decrease is well below the five-year average price increase of +0.9%
during this same window for companies reporting positive earnings surprises.”
Analysis at...
My cmt: When good news is punished, it is a bad sign for
the stock market.
ONE FOR THE AGES, PART TRES (The Felder Report)
“All told, it appears the current stock market mania has
infected everyone from teenagers playing hooky from their zoom classes to day
trade options to major institutions trying to piggy back on those trades to
analysts tripping over themselves to try to justify the highest valuations in
history. Perhaps it would behoove them to remember another famous J.P. Morgan quote:
“I made a fortune getting out too soon.” Commentary at...
https://thefelderreport.com/2021/02/17/one-for-the-ages-part-tres/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 6:00pm Monday. 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
-Monday the S&P 500 dropped
about 0.8% to 3877.
-VIX rose about 6% to 23.45.
-The yield on the 10-year
Treasury rose to 1.364%.
The market action continues to hint at a weakness. The
markets peaked around 2PM and slipped afterward and closed in negative
territory. As others have pointed out, February and March have been bad months
in the last 2 years.
Today was a statistically significant down-day. That just
means that the price-volume move exceeded my statistical parameters. Data shows
that a statistically-significant, down-day is followed by an up-day about 60%
of the time.
RSI, (SMA-14)
Relative Strength measures the size of up-moves vs.
all-moves on a 14-day moving average basis and presents the result as a
percentile. For example; if the RSI is 85, it means that the size of up-moves
are in the 85th percentile when compared to all moves over the 14-day
period. If ALL moves had been up, RSI would be 100 – a definite short term
sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to
the upside) and 80 is overbought. If the up-moves and down-moves are equal in
size over the 14-day period, RSI would be 50.
RSI was 87 Friday – a clear
overbought indication.
I like to consider RSI in
tandem with Bollinger Bands. Bollinger
Bands were overbought back in January. Now, not so much, so we don’t have a confirmed
top sign.
The daily sum of 20 Indicators improved from -7 to -6 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations dipped from +6 to -5 (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 remained HOLD. Volume, VIX, Sentiment & Price are neutral.
It seems that we are in a bit of a pullback. We’ll see what happens at the 50-dMA. The last time we were there, 29 Jan, the
S&P 500 bounced strongly upward. We may get lower this time, but I doubt
that it will get too much smaller. The
breadth was pretty good at the last all-time high on the Index, and that suggests
a pullback of less than 10%. The 50-dMA is now 3793, about 2.2% lower than
today’s close.
I am still conservatively positioned, but I did add the
XLE-ETF 10 Feb. I won’t rush to add more
stocks, but I may bump stock holdings up to get to 50%, fully invested, if we
can get a pullback and identify a buy signal.
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
MONDAY 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 40% invested in stocks. You may wish to have a higher or lower % invested
in stocks depending on your risk tolerance. 40% is a 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.
