"Political leaders who sit silent in the face of
these false and dangerous claims [Trump’s stolen election lies] are aiding a
former president who is at war with the rule of law and the Constitution."
- Liz Cheney, Wyoming Republican
Representative.
“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“I think it’s clear that we’re deep into bubble
territory. Bubbles are characterized typically at the end of a long bull market
by a period where they accelerate, and they start to rise at two or three times
the average speed of the bull market, which they did last year of course. Of
course, they’re always extremely overpriced by average historical standards.
There are a few people who would still argue that 2000 was higher, but most of
the data suggests that this is the new American record for highest priced
stocks in history. Then there’s the most important thing of all, which is crazy
behavior, the kind of meme stock, high participation by individuals, enormous
trading volume in penny stocks, enormous trading volume in options, huge margin
levels, peak borrowing of all kinds, and the news is on the front page. This is
all characteristic of the handful of great bubbles that we’ve had.” – Jeremy Grantham, GMO, The Top of
the Cycle, August
2021
WHEN BUBBLE MEETS TROUBLE – EXCERPT (Hussman Funds)
“At present, our measures of market internals remain sufficiently
divergent to hold us to a strongly defensive stance. Indeed, the main headwind
for hedged equity strategies in recent weeks has been the divergence between
the broad market and capitalization-weighted indices dominated by overvalued
large-cap glamour stocks. Still, we’re close enough to the threshold to refrain
from “fighting” a further advance or amplifying our bearish outlook if
investors remain punch-drunk enough to chase greater extremes. What we will not
do, except at markedly less extreme valuations, is to adopt an unhedged
investment stance. I expect that this bubble will end terribly, and the damage
will take more than a decade to undo.... Emphatically, nothing in our
discipline presumes that this bubble cannot continue. We’ll respond to observable valuations,
market internals, and other factors as they change, and an improvement in
market internals here could defer our immediate (though not longer term)
concerns. Still, in a bubble that’s already “checked all the boxes,” this may a
particularly opportune moment to remember that, for disciplined investors, risk
management is generous.” – John Hussman, Phd.
Testing the background color...repeating yesterday’s post
to see if I still have an issue...
JOHN DURHAM IS GETTING CLOSE TO THE JUGULAR (RealClear
Politics)
“Last week, John Durham’s grand jury issued its third
criminal indictment in the Trump-Russia collusion hoax. The person who was
arrested may be obscure; the news may have been buried after Virginia’s
bombshell election results; but Durham’s move is a big deal. It shows that the
special counsel’s probe is methodically unraveling a huge conspiracy, seemingly
engineered by Hillary Clinton’s 2016 campaign and implicating James Comey’s
FBI, either as a willing participant or as utterly incompetent boobs... What
Durham and a few intrepid reporters are uncovering may well be the most
ambitious dirty trick pulled in an American election and its aftermath.” –
Charles Lipson, professor emeritus of political science at the University of Chicago. Story at...
This article is a good accounting of the Trump-Russia
collusion hoax from start to...not finished yet.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as of
7:00 PM Thursday. 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.
Trend numbers remain essentially flat. At this point, we
worry that the new cases may start rising, but it is too soon to make a call
either way.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 rose about 0.1% to 4649.
-VIX fell about 6% to 17.66.
-The yield on the 10-year Treasury was 1.554%.
In my search for stock market indicators I have developed
a few odd ones. One that I track is a
daily statistical analysis of price-volume moves in the S&P 500. One wouldn’t think that the size of daily
moves could be a tell for the markets, but it is in one respect. When daily variability of price-volume moves becomes
very small, it suggests a significant drop in the market is coming. By
significant, I mean a move down greater than 1%, often followed by further
downside. That’s what I am seeing now. The problem is that the timing varies
from almost immediate to more than a month. I think the best way to describe it
is to suggest that the indicator warns that the markets have become very fragile
and it won’t take much of a surprise to start a small panic. Whether that becomes a big panic depends on
the surprise. The last couple of times this indicator has warned the S&P
500 has dropped from 1 to 3%.
The daily sum of 20 Indicators declined from +5 to -3 (a
positive number is bullish; negatives are bearish); the 10-day smoothed sum
that smooths the daily fluctuations improved from +16 to +20 (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term so they tend to bounce around a lot.
The Long Term NTSM indicator ensemble
remained HOLD. Price, Volume, Sentiment and VIX indicators are neutral. The
number of up-days over the last 20-days remains bearish. This has sometimes
indicated a major top – this time, I am not convinced.
I am cautiously bullish.
I reduced stock holdings to my normal fully invested
position today (50% in stocks) due to statistcal analysis of price-volume in
the S&P 500. It gave a warning today.
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
** XLE has outgained XLY over
the last 2 months so I am still holding XLE rather than XLY.
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
THURSDAY MARKET INTERNALS
(NYSE DATA)
Market Internals slipped to HOLD.
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 50% invested in stocks; this is my “normal” fully
invested stock-allocation of 50% 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 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.
