“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.
PAYROLL REPORT / UNEMPLOYMENT RATE (Yahoo Finance)
“The U.S. economy added back another more than half a
million jobs in May, with employment accelerating from April but still missing
estimates even as the jobless rate slid to a new pandemic-era low... Change in non-farm payrolls: +559,000...
at 5.8%, the unemployment rate for May also marked the lowest level since March
2020...” Story at...
FACTORY ORDERS (Reyters)
“New orders for U.S.-made goods fell more than expected
in April as a global semiconductor shortage weighed on the production of motor
vehicles and electrical equipment, appliances and components. The Commerce
Department said on Friday that factory orders dropped 0.6% in April...” Story
at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 7:30 AM Saturday. 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. For
the week, the 10-dMA was around 18,500 new-cases per day.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 rose
about 0.9% to 4230. (Not quite an all-time high.)
-VIX fell about 9% to 16.42.
-The yield on the 10-year
Treasury dipped to 1.554%.
While the S&P 500 didn’t
quite make a new high Friday, it is worth looking at the stats. The
advance was reasonably broad: 9.4% of issues on the NYSE made an all-time,
new-52-week high on Friday and 64% of issues on the NYSE were up on the day.
That’s a plus for the markets.
On the negative side, Friday
was a statistically significant up-day. That just means that the price-volume
move exceeded my statistical parameters. Data shows that a
statistically-significant, up-day is followed by a down-day about 60% of the
time.
Thursday, we saw very high,
unchanged-volume and it was still above normal on Friday. In theory this in an indication that
investors are confused and it can signal a reversal, in this case down. I’ve
tried to develop an indicator based on this without much success.
The chart does not look great
to me. It has not progressed much in the last 3-weeks and a statistically
significant up-day near the top is always a concern. Still, the indicators are
mostly bullish so I’ll remain a cautious bull.
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%.
-Cyclical Industrials (XLI-ETF) are out-performing the
S&P 500.
-Slope of the 40-dMA of New-highs is rising.
-McClellan Oscillator is bullish.
-The 5-10-20 Timer System is BUY; the 5-dEMA and 10-dEMA are
both above the 20-dEMA.
-MACD of S&P 500 price made a bullish crossover 27
May.
-Short-term new-high/new-low data is rising.
-The smoothed advancing volume on the NYSE is rising.
-The size of up-moves has been larger than the size of
down-moves over the last month.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 1 June.
-The S&P 500 is out-performing the Utilities ETF
(XLU), and trending higher, so I’ll call this one bullish for now.
-66% of the 15-ETFs that I track have been up over the
last 10-days.
NEUTRAL
-My Money Trend indicator is flat.
-Long-term new-high/new-low data has stalled and is flat.
-VIX is flat - neutral.
-We had 5 Distribution Days recently, but not enough to
send a signal.
-Bollinger Bands – currently neutral.
-RSI.
-Non-crash Sentiment indicator remains neutral, but it is
too bullish and that means the signal is leaning bearish.
-The Fosback High-Low Logic Index is neutral.
-There have been 2 Statistically-Significant days in the
last 15-days. Neutral.
-There have been 6 up-days over the last 10-days.
Neutral.
-There have been 10 up-days over the last 20 days.
Neutral
-Statistically, the S&P 500 gave a panic-signal, 12
May. This one can be bearish or bullish. The signal has expired.
-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.
-14 May, the 52-week, New-high/new-low ratio improved by 0.7
standard deviations, somewhat bullish, but not enough to give a signal.
-The Smart Money (late-day action) is flat. (This
indicator is based on the Smart Money Indicator developed by Don Hayes).
BEAR SIGNS
-Overbought/Oversold Index (Advance/Decline Ratio).
-The S&P 500 is 12.5% above its 200-dMA (Sell point
is 12%.). 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 14
bear-signs and 3 bull-signs. Last week, there were 12 bear-signs and 2
bull-signs.
There are 3 top-signals; (1) The
Index is too far ahead of breadth. (2) The Index is too far ahead of its
200-dMA. (3) Money trend is too far ahead of the S&P 500. These are
concerning, but not enough to call a top.
The daily sum of 20 Indicators declined from +3 to +7 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations rose from +24 to +35. (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. Price is Bullish; Volume, VIX, & Sentiment are neutral.
I am bullish until we see more
bearish signs.
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 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. I am not super bullish, but I
am not bearish either so 50% is a reasonable allocation for me.
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.
