“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 (ABC7)
“U.S employers added just 49,000 jobs in January, a sign
that that the viral pandemic retains a tight grip on the economy nearly a year
after it triggered a painful recession. The tepid increase followed a decline
of 227,000 jobs in December, the first loss since April.” Story at...
https://abc7.com/us-economy-january-jobs-report-joe-biden-unemployment/10316239/
The unemployment rate
dropped from 6.7% to 6.3%.
HOURLY EARNINGS / AVG WORKWEEK (Sierra Sun Times)
“In January, average hourly earnings for all employees on
private nonfarm payrolls increased by 6 cents to $29.96... The average workweek
for all employees on private nonfarm payrolls increased by 0.3 hour to 35.0
hours in January.” Story at...
REGRESSION TO TREND: ANOTHER LOOK AT LONG-TERM MARKET
PERFORMANCE (Advisor Perspectives)
Charts and commentary at...
MARKET REVIEW: BULL MANIA - EXCERPT (RIA)
“The market is currently priced for perfection betting on
explosive economic growth, a falling dollar, interest rates remaining low, consumer
spending surging sharply, and inflation remaining muted. The reality is that
none of those things will likely turn out to be the case... What this
analysis does suggest is that we should use rallies to rebalance
portfolios.
-Trim Winning Positions back to their original
portfolio weightings. (ie. Take profits)
-Sell Those Positions That Aren’t Working. If they
don’t rally with the market during a bounce, they will decline more when the
market sells off again.
-Move Trailing Stop Losses Up to new levels.
-Review Your Portfolio Allocation Relative To Your Risk
Tolerance. If you have an aggressive allocation to equities at this point
of the market cycle, you may want to try and recall how you felt during 2008.
-Raise cash levels and increase fixed income accordingly
to reduce relative market exposure.
Could I be wrong? Absolutely.” - Lance Roberts, Chief Portfolio
Strategist/Economist for RIA Advisors.
Commentary at...
https://realinvestmentadvice.com/market-review-bull-mania-the-charge-of-the-light-brigade/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:10pm 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 rose
about 0.4% to 3887.
-VIX dropped about 4% to 20.87.
-The yield on the 10-year
Treasury rose to 1.169%.
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 Fosback High-Low Logic Index is very bullish. (We’ve
seen high new-highs and low new-lows although that s changing.)
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
above the 20-dEMA.
-MACD of S&P 500 price made a bullish crossover
today, 5 February.
-The smoothed advancing volume on the NYSE is rising.
-My Money Trend indicator is rising.
-Short-term new-high/new-low data is rising.
-Slope of the 40-dMA of New-highs is rising.
-McClellan Oscillator is rising.
-61% of the 15-ETFs that I track have been up over the
last 10-days – bullish.
NEUTRAL
-VIX is reasonably flat.
-Overbought/Oversold Index (Advance/Decline Ratio).
-Bollinger Bands are close to overbought, but are not
there yet.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-Long-term new-high/new-low data is flat.
-The market has broadened out; 8.9% 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 is neutral, but it is approaching overbought.
-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).
-The 100-dMA of the % of stocks advancing on the
NYSE (Breadth) is above 50%. However, it is falling.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means it is leaning bearish.
-6 Jan, the 52-week, New-high/new-low ratio improved by 4.3
standard deviations – very bullish and also rare. Signal has expired.
-We’ve seen 7 up-days over the last 10-days. Neutral.
-There have been 13 up-days over the last 20 days.
Neutral
-Statistically, the S&P 500 gave a panic-signal, 27
January. This usually means more downside to come, but the signal has expired.
-The size of up-moves has been smaller than the size of
down-moves over the last month, but by less than is required to give a bear
signal.
-The S&P 500 is outperforming Utilities ETF (XLU),
but the outperformance is flat, so I’ll call this one Neutral.
BEAR SIGNS
-The S&P 500 is 15.1% above its 200-dMA (Sell point
is 12%.); when Sentiment is considered, the signal is also bearish.
-MACD of the percentage of stocks advancing on the NYSE
(breadth) made a bearish crossover 21 Jan., but it is improving and may not be bearish
much longer.
-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 3
bear-signs and 11 bull-signs. Last week, there were 15 bear-signs and 2
bull-signs.
So, we see a strong turn to the upside. Given the market
action recently, that’s not too much of a surprise, but it was a huge
turn-around. Last week it appeared that we were headed for a bigger pullback. I always try to remember, indicators can sometimes suggest a future; but usually they indicate a trend. Sometimes the trend can turn on a dime.
Currently, I don’t see many top-Indicators warning of a top – only the
% above the 200-dMA. Since the markets had been ignoring that indicator, it
looks like we can go higher.
The daily sum of 20 Indicators improved from -5 to +5 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations improved from -62 to -55. (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. VIX, Volume, Sentiment & Price are neutral.
There have been 5 up-days in a row, so we should see a
down-day Monday. A correction from here is not too likely, but we are not far
from an overbought indication from Bollinger Bands and RSI. That would make me
bearish in the short-term.
I am still conservatively positioned, but with the FED
pumping liquidity and Biden pledging a huge stimulus bill passing, I am tired
of fighting the FED. I’ll be increasing stock positions soon unless we see some
more signs of a top.
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 improved to BULLISH 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.
