“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.
FED WARNS OF POTENTIAL FOR SIGNIFICANT DECLINES IN ASSET
PRICES AS VALUATIONS CLIMB (CNBC)
“Rising asset prices in the stock market and elsewhere
are posing increasing threats to the financial system, the Federal Reserve
warned in a report Thursday. In its semiannual Financial Stability Report, the central
bank said that while the system overall has remained largely stable even
through the Covid-19
pandemic, future dangers are rising...” Story at...
BERKSHIRE HATHAWAY SEEING “VERY SUBSTANTIAL INFLATION” AND
RAISING PRICES (CNBC)
“Warren
Buffett is seeing inflation among Berkshire
Hathaway’s collection of businesses as the economic recovery from
the Covid pandemic kicks
into high gear. ‘We are seeing very substantial inflation,” the Berkshire
chairman and CEO said at the conglomerate’s annual shareholder meeting
Saturday. ‘It’s very interesting. We are raising prices. People are raising
prices to us and it’s being accepted.’” Story at...
THERE IS SO MUCH CASH ON THE SIDELINES THE MARKET HAS TO
GO UP
But wait! There are no sidelines:
“‘There are no sidelines. Those saying this seem to
envision a seller of stocks moving money to cash and awaiting a chance to
return. But they always ignore that this seller sold to somebody, who
presumably moved a precisely equal amount of cash off the sidelines.’ – Cliff Asness This quote
from...
https://realinvestmentadvice.com/macroview-are-stocks-cheap-or-just-another-rationalization/
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 8:00pm 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 0.7% to 4232.
-VIX slipped about 9% to 16.69.
-The yield on the 10-year
Treasury rose to 1.577%.
Last week the CNBC pundits were
talking pullback. It didn’t happen, yet. Just proves an old adage on Wall
Street – When everyone thinks the market will do something, it does the
opposite.
Here’s Friday’s 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 issues advancing on the NYSE
(Breadth) is above 50%
-The 50-dMA % of issues advancing on the NYSE (Breadth)
is above 50%.
-The 100-dMA of the % of issues advancing on the
NYSE (Breadth) is above 50%.
-VIX is falling sharply - bullish.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500.
-Thursday we had a Follow-thru Day that cancels prior Distribution
Days.
-McClellan Oscillator is bullish.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 30 Apr.
-Slope of the 40-dMA of New-highs is rising, but not by
much.
-61% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-Long-term new-high/new-low data is flat.
-Short-term new-high/new-low data is flat.
-RSI.
-Overbought/Oversold Index (Advance/Decline Ratio).
-The market has broadened out; 16.6% of all issues
traded on the NYSE made new, 52-week highs when the S&P 500 made a new
all-time-high 7 May. (there is no bullish signal for this indicator.)
Currently, the value is above average and suggests that if we do have a
correction from here it would likely be less than 10% - maybe. This number is
getting so high that one wonders whether it is too bullish.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means it is leaning bearish.
-My Money Trend indicator.
-The Fosback High-Low Logic Index is neutral.
-There have been 6 up-days over the last 10-days.
Neutral.
-There have been 11 up-days over the last 20 days.
Neutral
-Statistically, the S&P 500 gave a panic-signal, 27
January. The signal has expired.
-8 Mar, the 52-week, New-high/new-low ratio improved by 3.5
standard deviations very bullish, but the signal has expired.
-There have been 4 Statistically-Significant days in the
last 15-days. This signal can be Bearish or Bullish, but it takes 5 to give a
signal. (If it were to signal now, it would be bearish.)
-The S&P 500 is out-performing Utilities ETF (XLU),
but just barely, so I’ll call this one neutral for now.
BEAR SIGNS
-Bollinger Bands. Thursday, we had a Bollinger Squeeze.
This suggests a breakout is coming. There are enough topping sings to indicate
the breakout will be down. In addition, as of Friday, Bollinger Bands are
“overbought,” another bearish sign.
-The smoothed advancing volume on the NYSE is falling.
-MACD of S&P 500 price made a bearish crossover 22
Apr.
-The Smart Money (late-day action) is now headed down. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
-The S&P 500 is 15% above its 200-dMA (Sell point is
12%.); when Sentiment is considered, the signal is also bearish. This value was
15.9% above the 200-dMA when the 10% correction occurred in Sep 2020.
-Breadth on the NYSE compared to the S&P 500 index is
bearish – the Index is too far ahead of stocks advancing on the NYSE.
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 6
bear-signs and 12 bull-signs. Last week, there were 8 bear-signs and 10
bull-signs.
The Bull-signs outnumbered the
Bear-signs, by a decent amount, but there is a significant caution sign. It
would only take 1 more top-indicator to give us a top-warning.
Top Indicators that are
currently warning: (1) The Index is too far above its 200-dMA; (2) the Index is
too far ahead of breadth; (3) and the Index is too far ahead of Money Trend. (4)
Bollinger Bands
The daily sum of 20 Indicators
improved from -1 to +2 (a positive number is bullish; negatives are bearish);
the 10-day smoothed sum that smooths the daily fluctuations dropped from +36 to
+29 (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 BUY. Price & VIX are bullish; Volume & Sentiment are
neutral. This indicator can be slow to turn.
So far not much has changed – neither has my conclusion:
Pullback? I still think one is coming, but the indicators
show a mostly neutral playing field. Indicators aren’t very strong in any
direction. It would seem likely that until indicators change, or we see more
consistently negative price action, the slow melt-up will continue.
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 declined 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.
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.
