“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.
IHS MARKIT MANUFACTURING PMI (Markit Economics)
“May PMITM data from IHS Markit indicated a substantial
improvement in the health of the U.S. manufacturing sector, with the rate of
overall growth accelerating to a fresh record high...Chris Williamson, Chief
Business Economist at IHS Markit said: “US manufacturers are enjoying a bumper
second quarter, with the PMI hitting a new high for the second month running in
May. Inflows of new orders are surging at a rate unsurpassed in 14 years of
survey history, buoyed by reviving domestic demand and record export sales as
economies reopen from COVID-19 restrictions. However, elevated levels of other
survey indicators are less welcome: prices charged by manufacturers are also
rising at an unprecedented rate, linked to soaring input costs and unparalleled
capacity constraints.” Press release at...
https://www.markiteconomics.com/Public/Home/PressRelease/fca84cfcbc154e05a2bd805b264290e5
CONSTRUCTION SPENDING (Yahoo Finance/Reuters)
“The Commerce Department said on Tuesday that
construction spending rose 0.2% after surging 1.0% in March...Construction
spending, which accounts for about 4% of gross domestic product, jumped 9.8% on
a year-on-year basis in April.” Story at...
https://finance.yahoo.com/news/u-construction-spending-rises-moderately-143151110.html
ISM MANUFACTURING INDEX (ISM)
“Economic activity in the manufacturing sector grew in
March, with the overall economy notching a 10th consecutive
month of growth, say the nation's supply executives in the
latest Manufacturing
ISM® Report On Business®...“The manufacturing economy
continued its recovery in March. However, Survey Committee Members reported
that their companies and suppliers continue to struggle to meet increasing
rates of demand due to coronavirus (COVID-19) impacts limiting availability of
parts and materials. Extended lead times, wide-scale shortages of critical
basic materials, rising commodities prices and difficulties in transporting
products are affecting all segments of the manufacturing economy. Worker
absenteeism, short-term shutdowns due to part shortages, and difficulties in
filling open positions continue to be issues that limit manufacturing-growth
potential.” Press release at...
RETROACTIVE TAX INCREASE (WSJ)
“President Biden really is a class warrior. Not only does
he want to raise taxes on capital gains to a modern high of 43.4%, he wants to
do it retroactively. The Administration leaked Thursday that its new high rate
would apply to all gains on assets sold after the introduction of its American
Families Plan in April.” Story at...
https://www.wsj.com/articles/a-retroactive-tax-increase-11622241471
RETROACTIVE TAX INCREASES AND THE CONSTITUTION (Heritage
Foundation)
“At least three lessons emerge from these stories [about
retroactive tax increases]: First, that Congress is at fault for the imposition
of retroactive tax liability, although, in every case, it was a Democratic
Congress that imposed such a tax; second, the courts cannot be relied upon to
protect people from retroactive tax increases; and third, just because a law
may be constitutional doesn't mean that it's just or right.” Commentary at...
https://www.heritage.org/taxes/report/retroactive-tax-increases-and-the-constitution
Bottom
line: Retroactive tax increases are Constitutional.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 9:30pm Tuesday. 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.
LEAKS HAPPEN ALL THE TIME (msn.com)
"These kinds of lab leaks happen all the time,
actually. Even here in the United States, we've had mishaps. And in China, the
last six known outbreaks of SARS-1 have been out of labs, including the last
known outbreak, which was a pretty extensive outbreak that China initially
wouldn't disclose that it came out of lab," Gottlieb [former
head of the Food and Drug Administration (FDA)] told host John Dickerson
on CBS's "Face the Nation." Story at...
Gottlieb:
Lab leaks happen all the time (msn.com)
From the NTSM Blog on 6 Apr 2020: “We note that the EU
was caught flat-footed by the virus too. That’s not a criticism; this event was
very difficult to forecast. It wasn’t helped by the Chinese Communists who
concealed the emergence of a new Coronavirus and put doctors in prison when
they tried to publicize it. They also expelled US journalists who were
reporting the news from China...I am
suspicious that it may have escaped from a lab in Wuhan. If it didn’t, why were the commies trying to
cover it up?” – Meade Stith, NTSM Blog.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped
about 2 pts to 4202.
-VIX rose about 7% to 17.9.
-The yield on the 10-year
Treasury rose to 1.615%.
Another odd day...The S&P 500 slipped 2 pts (hardly
worth calling it a drop), but internals were really good. This has been the pattern for a few days (and
maybe more). The Index starts well in the morning and falters late while
internals remain strong. How strong? Advancers outpaced decliners by nearly 3
to 1; advancing volume was nearly 5 times higher than declining volume; and
there were 448 new-highs with only 23 new-lows. That tells us that the small caps were doing
well. That conclusion is borne out by the Russell 2000; it was up more than 1%
today. Majority rules and that is usually good news for the market overall
since the S&P 500 is likely to catch up to the majority, eventually.
The daily sum of 20 Indicators remained +4 (a positive number is bullish; negatives are bearish); the 10-day smoothed sum that smooths the daily fluctuations rose from +2 to +8. (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, Price, VIX, & Sentiment are neutral.
I am bullish until we see more
bearish signs.
I increased stock allocation
in the portfolio to a fully-invested, 50% in stocks, last week. I am not super
bullish, but I am not bearish either so 50% is a more reasonable allocation
than being under-invested. I added the XLB-Materials ETF.
Currently I am trading: XLE, XLF,
XLB, BA, and GS. Boeing (BA) is the only issue that is not an NTSM high-momentum play. BA is a reopening trade that I repurchased 2 weeks ago; it is up
9% since then.
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
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained 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.
As of 25 May, my
stock-allocation is about 50% invested in stocks.
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.
