“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
“In my decades of investing experience, I have not seen
such mindless and uninformed speculation as I have witnessed
recently. Indeed, in nominal dollar terms...it is far in excess of the
dot.com boom.” – Doug Cass.
“I never imagined that I would see the day that the
Chairman of the House Judiciary Committee would step forward to call for raw [Supreme]
court packing. It is a sign of our current political environment where rage
overwhelms reason.” - Professor Jonathan Turley, honorary Doctorate of Law from
John Marshall Law School for his contributions to civil liberties and the
public interest.
“Sen. Lindsey Graham said Monday that it was
"impossible" for the Republican Party to progress without former
President Donald Trump as its leader, adding that those within the party who
criticized Trump would "wind up getting erased." Story at...
https://www.businessinsider.com/trump-leader-and-gop-critics-will-erased-says-lindsey-graham-2021-5
My cmt: After Trump’s seditious, stolen-election lies,
the fools in the Republican Party think Trump must be its leader? They are
flushing the center. In this country, one can’t be elected President, or to the
Senate, without the center...the House? Yes, but nowhere else.
CPI (WSJ)
“Consumer prices surged in April by the most in any
12-month period since 2008 as the recovery picked up, reflecting both rising
demand as the Covid-19 pandemic eases and supply bottlenecks. The Labor
Department reported its consumer-price index jumped 4.2%
in April from a year earlier...” Story at...
https://www.wsj.com/articles/us-inflation-consumer-price-index-april-2021-11620781266
EIA CRUDE INVENTORIES (Energy Information Administration)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 0.4 million barrels from the
previous week. At 484.7 million barrels, U.S. crude oil inventories are about
2% below the five-year average for this time of year.” Press release at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
IF EVERYONE SEES IT, IS IT A BUBBLE? (RIA)
“There is more than adequate evidence a “bubble” exists
in markets once again...“It’s important for all of us to be aware of this bubble
psychology, but especially if you’re a retiree or a near-retiree.
That’s because, in that case, your investment horizon is far shorter than for
those who are younger. Therefore, you are less able to recover from the deflation
of a market bubble.” Commentary at...
https://realinvestmentadvice.com/technically-speaking-if-everyone-sees-it-is-it-still-a-bubble/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:30pm 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
fell about 2.1% to 4063.
-VIX jumped about 26% to 27.59.
(Holy-crash Batman – it was below 18 just 3 days ago.)
-The yield on the 10-year
Treasury rose to 1.70%.
On the third try, using repair
tools to fix my MS Word problem (Word documents opened blank), I clicked on
Word first rather than a Word file icon - problem fixed! Now to the markets...
The inflation numbers were
awful. Even though the FED is “sure” it is only transitory, the markets are not
so sure. Autos increased 10%; Consumer Prices were up 0.8% for the month, a 10%
annual rate (0.8% x 12months = 9.6%); lumber and housing have been a problem
for a while. It will be a month before we get a new CPI number. The market may
be worried for some time.
These are scary numbers, but
rather than get too carried away, I’ll try to just follow the market’s
reaction. So far, the market did not like them. Inflation looks like a valid
reason for a decent sized correction.
A trip to the 200-dMA seems
more likely now that we have some bad news to shake investor confidence. The
200-dMA is 3693, 10% below today’s close. It doesn’t have to happen. The
S&P 500 remained above its 50-dMA (4050) today and closed 0.3% above it. We’ll
watch in the coming days to see if the 50-dMA holds.
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. Hard to bet on that stat, though. We may be
in a waterfall decline where prices fall straight down for a number of days,
given the price action so far.
There was at least one bull
sign today; Bollinger Bands are now “oversold”. I don’t place much importance
in this since RSI is not oversold. As noted above, the S&P 500 is slightly
above the 50-dMA. It is also at the lower trend line. Could today be a bottom? It doesn’t look like
it. Volume was a little lower today, but internals were worse. Today is not likely to be the bottom, but
that doesn’t mean it couldn’t bottom tomorrow.
Late-day action is down, so it
would appear that the Pros don’t like this market either. Usually, the Pros start buying before the
market bottoms.
The daily sum of 20 Indicators
declined from -10 to -11 (a positive number is bullish; negatives are bearish);
the 10-day smoothed sum that smooths the daily fluctuations dropped from +2 to -14
(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 & VIX are negative; Price & Sentiment
are neutral. During the QE period after the Financial crisis, I didn’t pay
attention to the Long-Term indicator until the S&P 500 fell more than 5%.
So far, we are down 4% from the top. I probably won’t sell any more unless the Index
closes below the 50-dMA and stays there for at least 2 days.
I am already at a conservative stock allocation of only
40% in stocks. My trading positions are in Energy (XLE) and Financials (XLF and
JPM). They held up reasonably well today (XLE was up), but I might sell the
financials to cut risk further as noted above.
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 NEGATIVE 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.
As of 19 April, my
stock-allocation is about 40% invested in stocks. I hadn’t intended to drop
this low, but I took profits in both Boeing and Intel due to their dropping out
of the top 3 in momentum. I’ll move back in when conditions appear more
favorable.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees. 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, and I can call a bottom, 80% would not be out
of the question.
The markets have not
retested the lows on recent corrections and that left me under-invested on the
bounces. I will need to put less reliance on retests in the future.
