“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
NEW HOME SALES (Reuters)
“Sales of new U.S. single-family homes increased more than expected in January, boosted by historically low mortgage rates and an acute shortage of previously owned houses on the market. New home sales rose 4.3%...” Story at...
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the
previous week. At 463.0 million barrels, U.S. crude oil inventories are about
0% below the five-year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
CASS FREIGHT INDEX SHIPMENTS AND EXPENDITURES (CASS
Information Systems)
“The shipments component of the Cass Freight Index
accelerated to 8.6% y/y growth in January 2021 from 6.7% y/y growth in
December...This acceleration takes us another step closer to the strong growth
environment which we expect to continue in 2021, due in no small part to easy
comparisons. On a two-year stacked basis, the Cass Shipments Index was still
1.6% below January 2019...The strong acceleration in the Cass Expenditures
Index continued in January to 19.5% y/y growth from 13.0% in December.”
Press release at...
https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/january-2021
My cmt: We note a 10% increase in shipment rates in the
chart above. Interesting, that so far, the FED does not see any inflation.
There seems to be a lot of inflation (e.g., PPI and Commodities - lumber cost
has doubled) that is not showing up in Personal Consumption Expenditures. The
next piece suggests that the current market weakness is inflation related.
WILL INFLATION JUSTIFY INVESTOR CONCERNS (Financial
Times)
“Wall Street is beginning to fret about the prospect of rising inflation...The
10-year break-even rate, a common marker of investors’ inflation expectations,
hovered around 2.2 per cent last week, reflecting concerns that a looming
$1.9tn stimulus package from the Biden administration, paired with continued
loose monetary policy from the Federal Reserve, will eventually lead to stronger
inflation.” Story at...
https://www.ft.com/content/84012e15-554c-485c-8064-dbc6b4098bca
BLOWING UP THE EVERYTHING BUBBLE (Real Investment Advice)
“The US economy is literally on perpetual life support.
Recent events show too clearly that unless fiscal and monetary stimulus
continues, the economy will fail and, by extension, the stock market...What the
average person fails to understand is that the next “financial crisis” will
not just be a stock market crash, a housing bust, or a collapse in bond
prices...It could be the simultaneous implosion of all three...I am not saying
with certainty it will happen, as I hope sanity prevails and actions are taken
to mitigate the consequences. Unfortunately, history suggests such is unlikely
to be the case.” - Lance Roberts, Chief Portfolio Strategist/Economist
for RIA Advisors.
Commentary at...
https://realinvestmentadvice.com/technically-speaking-blowing-up-the-everything-bubble/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as of 7:00pm 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 1.1% to 3926.
-VIX fell about 8% to 23.11.
-The yield on the 10-year
Treasury rose to 1.397%.
Monday and Friday were both
Distribution days and the 5-week total was 6-distribution days so we got a
bearish “distribution” signal on Monday. I am not a big fan of this indicator,
but it does suggest that we are in a down-trend until we see other signs of a
trend change. Volume was not high enough to flip this indicator positive today.
In addition, there is one
bearish top-indicator: The S&P 500 is a bearish 14.1% above its 200-dMA
(Sell point is 12%.); when Sentiment is considered, the signal is also bearish.
Today was a statistically
significant up-day. That just means that the price-volume move exceeded my
statistical parameters. Data shows that a statistically-significant, up-day is
followed by a down-day about 60% of the time.
Still, there are some good
bull-signs. Cyclical Industrials (XLI-ETF) are turning up and are improving vs.
the S&P 500; Utilities (XLU-ETF) are underperforming the Index. These
indicate that investors don’t seem worried about a correction or recession. New-highs
jumped up today after some weakness earlier.
The daily sum of 20 Indicators improved from -6 to zero
(a positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations dipped from -17 to -19 (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.
Apparently, FED Chair Powell said the right things. The
markets reacted upward today with some very positive action. I’m guessing that
the pullback is postponed. I plan to
watch market action Thursday. I’ll add to stock holdings if the markets are
trending upward. I’ll wait a bit longer
if the market action is weak.
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDNESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals improved 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 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.
