“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“People always ask me what is going on in the markets. It
is simple. Greatest Speculative Bubble of All Time in All Things. By two orders
of magnitude.” – Michael “Big Short” Burry.
"If I was Darth Vader and I wanted to destroy the US
economy, I would do aggressive spending in the middle of an already hot
economy...This is the biggest bubble I've seen in my career." - Stanley
Druckenmiller, billionaire investor.
“Inflation is not going to be transitory;
I’ve been pretty certain in my mind about three prior calls. This is the fourth
one.” - Mohamed El-Erian, Chief economic adviser at Allianz SE
EARNINGS (FACTSET)
“At this point in time, more S&P 500 companies are
beating EPS estimates for the second quarter than average, and beating EPS
estimates by a wider margin than average. As a result, the index is reporting
higher earnings for the second quarter today relative to the end of last week
and relative to the end of the quarter. The index is currently reporting the
highest year-over-year growth in earnings since Q4 2009. Analysts also expect
double-digit earnings growth for the second half of 2021.” Analysis at...
https://insight.factset.com/sp-500-earnings-season-update-july-30-2021
ISM MANUFACTURING (Reuters)
“U.S. manufacturing continued to grow in July, though the
pace slowed for the second straight month as spending rotates back to services
from goods and shortages of raw materials persist. The Institute for Supply
Management (ISM) said on Monday its index of national factory activity fell to
59.5 last month...” Story at...
CONSTRUCTION SPENDING (KFGO)
“U.S. construction spending rose by 0.1% in June, the
Commerce Department said on Monday, as an increase in private projects was
offset by a fall in public sector building.
https://kfgo.com/2021/08/02/u-s-construction-spending-inches-higher-in-june/
TO ADVANCE THE CLIMATE AGENDA – NEVER WASTE BAD WEATHER
(Real Clear Energy)
“Climate alarmists, of course, expect the public to
believe that the drought is caused by global warming. But the natural history of the West over the past 1,100 years
shows that megadroughts lasting as long as 200 years are the norm rather than
the exception. And since the federal and state governments kicked out the
loggers and stopped managing public lands 40 years ago, these wildfires may
come back every year until there is nothing left in the West to burn...
...According to the most recent NASA satellite data, the
average global temperature for June 2021 was slightly below the 30-average. But don’t
expect climate and weather reality to dampen the alarm repeated over and over
every day in the media. President Biden and Democrats plan to pass a $3.5
trillion “stimulus” bill in the fall. About $2 trillion of the spending is
earmarked for climate.”
My cmt: Oh, by the way...they are having record cold in
Brazil, including snow that some had not seen on more than 60 years.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 7:00 PM Monday. 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.
Monday was another day with more than 100,000 new cases. China
has some serious lockdowns underway. My
guess is that the US will not have another lockdown.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 0.2% to 4387.
-VIX rose about 7% to 8.46.
-The yield on the 10-year Treasury slipped to 1.178%.
While a chart over the last 3 months shows the S&P
500 near its upper trend line, a longer-term chart is much more optimistic. The
longer-term chart, say back to November 2020, shows that the Index has a lot of
room to run higher. Whether it will, remains to be seen. It is very likely, but
we could always see a correction first.
One worrisome sign is that sentiment is very high. I
measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts
invested in Rydex/Guggenheim mutual funds. It is currently at 96%-bulls (as of
Wednesday’s close) on a 5-day average. On a standard deviation basis this close
to levels seen during the dot.com crash. This isn’t by itself a great indicator
since sentiment can remain elevated for some time, but it is a level that is
close to a point that has preceded pullbacks of varying degrees – from small
pullbacks of a couple % to major crashes.
I’d need to see a slightly higher sentiment and more negative signs to
take action, but it is a cautionary indication.
Today, we had extremely high,
unchanged-volume. In theory this in an
indication that investors are confused and it can signal a reversal. I’ve tried
to develop an indicator based on this without much success. Sometimes it’s true; sometimes not.
The daily sum of 20 Indicators improved from -1 to +1 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from -55 to -40. (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 Short-term, market-internals ensemble indicator
remained POSITIVE/BULLISH.
The Long Term NTSM indicator
remained HOLD. Volume is bullish; VIX, Price & Sentiment are neutral.
I am cautiously bullish.
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
MONDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained POSITIVE 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 stock-allocation is about 50%
invested in stocks. I am not super bullish (or bearish) and I am watching the
markets closely.
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.
