“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“Faced with a combination of record speculative extremes
and deteriorating speculative conditions, investors may want to remember that
the best time to panic is before everyone else does.” – John Hussman, Phd.
HAVE WE SEEN OIL’S PEAK? / COULD OIL PRICES REALLY HIT
200? (OilPrice.com)
“Have we
seen oil’s peak? Almost certainly not. Sanctions — both
official and a result of corporate decisions — are likely to be extended as the
death toll increases and the rest of the world becomes increasingly angered by
the indiscriminate destruction and deliberate loss of life. Current events are
driving commodity prices. While we have a period of apparent market calm just
now, that could — and probably will — all change as events unfold.” - Stuart
Burns via AG Metal Miner. Story at...
https://oilprice.com/Energy/Energy-General/Could-Oil-Prices-Really-Hit-200.html
WEAKNESS IN HIGH YIELD BONDS (McClellan Financial
Publications)
“The Daily A-D Line for corporate high yield bonds
continues to look quite ugly. That is a concern for the overall stock
market because high yield bonds drink from the same liquidity pool as stocks
do, and these bonds are arguably more sensitive than stocks are to liquidity problems.”
https://www.mcoscillator.com/learning_center/weekly_chart/continued_weakness_in_high_yield_bonds/
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 0.7% to 4173.
-VIX rose about 6% to 32.61.
-The yield on the 10-year Treasury rose to 2.144%.
Pullback Data:
Days since top: 48 (Avg= 30 days top to bottom for
corrections <10%; 60 days top to bottom for larger, non-crash pullbacks)
Drop from Top: Now 13% at close. Max at close: 13% (Avg.=
13% for non-crash pullbacks)
The S&P 500 is 6.6% below its 200-dMA & 6.5%
below its 50-dMA.
TODAY’S COMMENT:
Today, there were two new, significant bearish-signs, both
related to the 200-day moving average. First, there was a Death Cross on the
S&P 500. That means the 50-dMA of
the Index has crossed below its 200-dMA. Definition follows:
“The death cross is a technical chart pattern indicating
the potential for a major sell-off.
The death cross appears on a chart when a stock’s short-term moving average
crosses below its long-term moving
average. Typically, the most common moving averages used in this
pattern are the 50-day and 200-day moving averages.” Definition from...
https://www.investopedia.com/terms/d/deathcross.asp
The other major bearish sign is based on the slope of the
200-dMA. The slope of the 200-dMA for
the S&P 500 is now going down.
I remember a trader on a discussion board stating that
when the 200-dMA is falling, it is time to short with impunity. It shows that the
long-term trend is down. We know from last week that my indicator Bear/Bull
count is very bearish - 19-bear to 3-bull. As far as indicators go, including
the 2 bear-signals today, it doesn’t get much worse than this.
That doesn’t mean that the markets couldn’t stage a big counter-trend-rally, in fact we expect one soon if we see RSI and Bollinger Bands oversold on a big down-day.
There was a lot of Bull talk on CNBC today. Scott Minard
of Guggenheim was very bullish. He was
the guy that talked me into staying out of the market during the Coronavirus
rebound when my indicators were saying “Buy.” That was another lesson why, “Trade
what you see (indicators); not what you think” is so important. Minard was very
wrong then – I think he is wrong now.
WAS TODAY THE BOTTOM?
The S&P 500 tested its prior low today...was it a
bottom? No, internals deteriorated. They need to get better on retests.
There have been 6 up-days over the last 20 sessions and 2
up-days over the last 10 sessions, so we could always see a bounce.
The daily sum of 20 Indicators remained -3 (a positive
number is bullish; negatives are bearish); the 10-day smoothed sum that smooths
the daily fluctuations declined from +54 to +44 (The trend direction is more
important than the actual number for the 10-day value.) 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 SELL. VOLUME & VIX are bearish; SENTIMENT is
neutral. PRICE is bullish. The
Sell-signal isn’t meaningful now. It is
telling us market conditions are poor, as if we didn’t already know. The important sell-signal was 8 days after
the start of this correction.
Until we see more bullish signs, I remain bearish.
BEST ETFs - 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.
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
TRADING POSITIONS:
-I ‘m still holding the
XLE-ETF (Energy).
BEST DOW STOCKS - TODAY’S MOMENTUM
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.
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY MARKET INTERNALS (NYSE
DATA)
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.
I trade about 15-20% of the
total portfolio using the momentum-based analysis I provide here. If I can see
a definitive bottom, I’ll add a lot more stocks to the portfolio using an
S&P 500 ETF.
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.
