“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.
EVENTUALLY EVERYONE SELLS (Real Investment Advice)
“...there is a price where ‘everyone sells.’...As
markets decline, there is a slow realization that “this decline” is
not a “buy the
dip” opportunity. As losses mount, the need to “avert loss” increases until
individuals seek to “avert further loss” by selling.
Such is the point investors now face as losses mount on
financial statements, and every decision made seems to be wrong.
Given the lack of “panic, capitulation, and
discouragement,” it is highly likely this particular market cycle is not
yet complete.
We continue to suggest using rallies to reduce risk,
rebalance allocations, and increase cash levels opportunistically. Such
generally provides better outcomes than forced selling when markets fall apart.
As noted, the biggest challenge for most investors is the
lack of an investment strategy or discipline from the outset. Such provides the
basis for investment decisions based on fundamental, technical, or statistical
analysis rather than emotion.
Of course, if you don’t know what an investment strategy
or discipline comprises, that may be the best place to start.
https://realinvestmentadvice.com/investors-are-terrified-so-why-arent-they-selling/
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 1% to 4161.
-VIX dropped about 4% to 25.07.
-The yield on the 10-year Treasury declined to 2.982%.
PULLBACK DATA:
-Drop from Top: 13.3% as of today. 18.7% max. (Avg.= 13%
for non-crash pullbacks)
-Days from Top to Bottom: 107-days. (Avg= 30 days top to
bottom for corrections <10%; 60 days top to bottom for larger, non-crash
pullbacks)
The S&P 500 is 6.5% BELOW its 200-dMA & 1.78 %
BELOW its 50-dMA.
*I won’t call the correction over until the S&P 500
makes a new-high; however, we hope to be able to call the bottom when we see
it...and...we did call the market a trading “Buy” one day after the recent
trading-bottom on 12 May (That was a little early, ok).
MY TRADING POSITIONS:
SSO* - I added SSO today. (I may regret it since I am
probably over invested for a counter-trend rally.)
XLK*
UWM*
I’ll sell quickly if the rally appears to be failing.
XLE
DOW
TODAY’S COMMENT:
“Eventually Everyone Sells” so says Lance Roberts
above. He’s right, but that date is a
long way off. I think we are in crash
mode and we’ll see a 50% drop in the major market indeces. Major selling will occur
near the bottom as “long-term” investors throw in the towel. If history is any guide, the bottom may be years
away. The Dot.com crash started in 2000
and took 2 years to make bottom and then several more months before a higher-low
convinced investors (correctly) that the decline was over. For my money, the
Dot.com crash is a lot like the current downturn since valuations, by many measures,
were higher at the start of this decline than they were in year 2000.
For now, I am playing a counter-trend rally that has been
kicked off by a number of bull-signs after a significant decline that exhausted
itself. My guess is that the rally could peak at the 200-dMA on the S&P
500, but it could aways fail at the 50-dMA.
Mr. Market doesn’t pay any attention to my blog.
I’m putting this together a little early this afternoon, so
final numbers may be different, but on a big day like today, it isn’t going to
make any difference.
Today, the daily sum of 20 Indicators declined from +13
to +11 (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations improved from +127 to +127.
(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 20 indicators are short-term so they tend to
bounce around a lot.
LONG-TERM INDICATOR: The Long
Term NTSM indicator remained HOLD: PRICE & VOLUME are bullish; SENTIMENT is
neutral; VIX is bearish.
I am cautiously Bullish in the short-term and Bearish
longer-term. I am watching closely since we need to sell when the rally peaks (or
close to it).
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
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
TUESDAY 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.
