"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.
PERSONAL SPENDING / PCE PRICES (Reuters)
“U.S. consumer spending surged in August, but outlays
adjusted for inflation were weaker than initially thought in the prior month,
reinforcing expectations that economic growth slowed in the third quarter as
COVID-19 infections flared up... Consumer spending, which accounts for more
than two-thirds of U.S. economic activity, rebounded 0.8% in August...The
personal consumption expenditures (PCE) price index, excluding the volatile
food and energy components, climbed 0.3% after increasing by the same margin in
July.” Story at...
ISM MANUFACTURING (ISM)
"The September Manufacturing PMI® registered
61.1 percent, an increase of 1.2 percentage points from the August reading of
59.9 percent. This figure indicates expansion in the overall economy for the
16th month in a row after contraction in April 2020.” Report at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 10:30 PM Saturday. U.S. total case numbers are on the left axis; daily
numbers are on the right side of the graph in Red with the 10-dMA of daily
numbers in Green.
I added the smoothed 10-dMA of new cases (in purple) to
the chart.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 jumped up about 1.2% to 4357.
-VIX fell about 9% to 21.15.
-The yield on the 10-year Treasury dropped to 1.463%.
The Friday run-down of some important indicators flipped
to the bear side (10-bear and 6
-bull). These indicators tend to be both long-term and
short-term, so they are different than the 20 that I report on daily. Details
follow:
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 issues advancing on the NYSE
(Breadth) is above 50%.
-MACD of the percentage of issues advancing on the NYSE
(breadth) made a bullish crossover 23 September.
-McClellan Oscillator.
-The S&P 500 is out-performing the Utilities ETF
(XLU).
NEUTRAL
-Distribution Days.
There have been 4 in the last 25-days, not enough to send a signal.
-There have been 7 up-days over the last 20 days. Neutral
-There have been 5 up-days over the last 10-days. Neutral
-Bollinger Bands
-RSI.
-Breadth on the NYSE compared to the S&P 500 index is
neutral.
-The size of up-moves has been larger than the size of
down-moves over the last month, but not enough to give a signal.
-Cyclical Industrials (XLI-ETF) flattened relative to the
S&P 500.
-The S&P 500 is 5.3% above its 200-dMA (Bear
indicator is 12%.). This value was 15.9% above the 200-dMA when the 10%
correction occurred in Sep 2020.
-Calm-before-the-Storm Indicator – expired.
-There was a Follow-thru day on 15 Sept. This cancels any prior Distribution days, but
the signal has expired.
-The Fosback High-Low Logic Index is neutral.
-7.7% of all issues traded on the NYSE made new, 52-week
highs when the S&P 500 made a new all-time-high 2 September. (There is no
bullish signal for this indicator.) This is above the average for all-time
highs and suggests that if we do have a pullback, it is likely to be less than
10%.
-Overbought/Oversold Index (Advance/Decline Ratio) is
neutral.
-Statistically, the S&P 500 gave a panic-signal 17
Sept. Signal has expired.
-Non-crash Sentiment indicator remains neutral, but it is
very bullish and that means the signal is leaning bearish.
-21 Sep, the 52-week, New-high/new-low ratio improved by 0.2
standard deviations, somewhat bullish, but neutral.
-There were 5 Hindenburg Omen signals 16-23 Aug. The McClellan Oscillator turned positive
afterward, so the Omens have been cancelled.
-51% of the 15-ETFs that I track have been up over the
last 10-days.
BEAR SIGNS
-The smoothed advancing volume on the NYSE is falling.
-There have been 6 Statistically-Significant days in the
last 15-days. This can be a bull or bear signal. The pattern has been down so
I’ll put this in the bear category.
-MACD of S&P 500 price made a bearish crossover, 9
September.
-My Money Trend indicator.
-Long-term new-high/new-low data is down.
-Short-term new-high/new-low data is down.
-Slope of the 40-dMA of New-highs is down. This is one of
my favorite trend indicators.
-The Smart Money (late-day action) indicates the Pros are
bearish. (This indicator is based on the Smart Money Indicator developed by Don
Hayes).
-VIX is sharply rising. This is one of my more reliable
indicators.
-The 5-10-20 Timer System is SELL; the 5-dEMA and 10-dEMA
are both below the 20-dEMA.
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 10 bear-signs and 6 bull-signs. Last week, there were 7 bear-signs and 10
bull-signs.
This week’s reading has switched to the bear side as we
might have expected; but it’s not a huge bear sign overall. A lot of indicators are bullish. Perhaps we’re seeing a reversal to the upside? Friday there was very
high unchanged volume. That shows investor confusion and many believe that is a
signal for a reversal.
Unfortunately, that is very hard to discern at this
point. We haven’t had a successful retest
that would end the pullback. Without that successful test, we need to examine
indicators for signs of a reversal to the upside. Last week, we had a successful test followed
by successive high up-volume days. Both
signaled a pullback end. Then we had a reversal down. I doubt that it happens
often, but anything is possible in the markets. Now, all we have is a big
upward move. I’ll have to wait for more
bull signs before I commit more funds to stocks. Recently, these rallies have been sold by
market participants.
The daily sum of 20 Indicators remained -10 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations declined from -55 to -57 (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 SELL. VIX and Volume were bearish; Price & Sentiment
indicators are neutral.
Wall Street tends to like
gridlock in Congress – perhaps Friday’s big move up was due to the failure to
pass the 3.5+-trillion dollar infra-everything bill? Maybe they liked the
Coronavirus news? I doubt that Wall Street cares whether there is a government shutdown.
I don’t know if the move was news-driven, but if the move Friday was due to
news, news usually trumps technicals.
In the final analysis, until I
see more Bull signs, I remain bearish. Let’s see what happens Monday.
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 improved 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.
My stock-allocation in the
portfolio is now about 45% invested in stocks; this is below my “normal” fully
invested allocation of 50%.
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 general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
