“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; David Einhorn was
early.
PRODUCTIVITY (CHANNEL3000)
“U.S. productivity in the October-December quarter fell
by the largest amount in 39 years as the coronavirus pandemic roiled the labor
market. Productivity dropped at a rate of 4.8% in the fourth quarter...”
https://www.channel3000.com/i/us-productivity-fell-sharply-in-q4-while-labor-costs-rose/
“Productivity is commonly defined as a ratio between the
output volume and the volume of inputs. In other words, it measures how
efficiently production inputs, such as labour and capital, are being used in an
economy to produce a given level of output. Productivity is considered a key
source of economic growth and competitiveness and, as such, is basic
statistical information for many international comparisons and country
performance assessments.’ – Paul Krugman, “Defining and Measuring
productivity”. Paper at...
https://www.oecd.org/sdd/productivity-stats/40526851.pdf
JOBLESS CLAIMS (CNBC)
“New claims for jobless benefits came in a bit less than
expected last week though U.S. employment gains remain sluggish. First-time
claims for unemployment insurance totaled 779,000 for the week ended Jan. 30...”
Story at...
https://www.cnbc.com/2021/02/04/us-weekly-jobless-claims.html
FACTORY ORDERS (RTTNews)
“New orders for U.S. manufactured goods showed another
significant increase in the month of December, according to a report released
by the Commerce Department on Thursday. The report said factory orders jumped
by 1.1 percent in December...” Story at...
https://www.nasdaq.com/articles/u.s.-factory-orders-jump-more-than-expected-in-december-2021-02-04
US BECOMING A BANANA REPUBLIC – “NEWTON’S FIRST LAW” -
EXCERPT (Financial Sense)
“By far, the U.S. is running one of the world’s largest
budget deficits, even larger than third-world countries, and is also expanding
its money supply at rates often associated with banana republics. This can be
seen in the table below which shows various countries around the world and
their budget deficit relative to the size of their economy and the growth of
their M1 money
supply aggregate...”
“In addition to the historic money printing occurring on
a global scale, we believe the eroding fiscal picture of the U.S. relative to
developed and emerging market countries will lead to a weaker USD and provide
further fuel for higher commodity prices.” – Christopher Puplava, Chief
Investment Officer, Financial
Sense® Wealth Management. Commentary at...
https://www.financialsense.com/blog/19846/newtons-first-law-motion
THE SHORT MARCH BACK TO INFLATION (WSJ)
“The government’s emergency income support to individuals
and businesses has been an appropriate response to blunt the shock of the
pandemic. Fiscal and monetary policies have shifted to boost employment as
firmly as possible. But policy makers must take account of where things stand
now and how far they’ve pushed the dials. If the vaccines are successful, full
economic recovery will naturally unfold, and the emergency policies that helped
sustain the country during the crisis will prove excessive once the economy
normalizes. History is longer than the past 10 years, and its lesson is that
the risk of inflation ought not be taken lightly.” - (professor
of economics at Rutgers University and a visiting fellow at Stanford’s Hoover
Institution) and enior
economist at Berenberg Capital Markets). Commentary at...
https://www.wsj.com/articles/the-short-march-back-to-inflation-11612378471
WHY WON’T THE PRESIDENT LISTEN TO THE EXPERTS? (WSJ)
“President Joe Biden is still
claiming the economy needs another massive “rescue” bill from Washington. But
even the swamp’s official forecasters are expecting a good year for economic
growth in the U.S.” Commentary at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 5:50pm Thursday. 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
-Thursday the S&P 500 rose
about 1.1% to 3872.
-VIX dropped about 5% to 21.77.
-The yield on the 10-year
Treasury rose to 1.148%.
What pullback? The S&P 500
made a new-high on a big push near the close. In hindsight, the 50-dMA was the
key as the Index bounced up from there.
The % of new 52-week highs at
the new S&P 500 high was about average so there is no issue on this stat.
The daily sum of 20 Indicators declined from -2 to -5 (a
positive number is bullish; negatives are bearish); but the 10-day smoothed sum
that smooths the daily fluctuations declined from -61 to -62. (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 improved to HOLD. The Panic Indicator is Bearish, but the
signal is expiring. VIX, Volume, Sentiment & Price are neutral.
There have been 4 up-days in a row, so we might see a
down day tomorrow.
The Index remains stretched since it is now 14.9% above
its 200-dMA. Years ago, I traded this stat regularly by shorting whenever the
Index was 10% above its 200-day. I made
a lot of money. If I was shorting now, I’d be losing my butt.
I am still conservatively positioned, but with the FED
pumping liquidity and Biden pledging a huge stimulus bill, I am tired of fighting
the FED. I plan to increase stock positions in a few days unless we see more signs of a correction, but that seems less likely now.
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 THURSDAY 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.
