“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
PAYROLL REPORT / UNEMPLOYMENT RATE (Reuters)
“U.S. job growth slowed further in August as financial
assistance from the government ran out, threatening the economy’s recovery from
the COVID-19 recession. Nonfarm payrolls increased by 1.371 million jobs last
month after advancing 1.734 million in July, the Labor Department’s closely
watched employment report showed on Friday. The unemployment rate fell to 8.4%
from 10.2% in July.” Story at…
HUGE DISCREPANCY IN JOBS REPORT (MishTalk)
“Continued claims for the week ending August 15 was 14.492 million
as per the BLS. Yet, the BLS also says the number of unemployed for that week
was 13.550 million…
…My conclusion is today's unemployment rate numbers are
total garbage.” – Mish Shedlock. Commentary and analysis at…
My cmt: Mish goes thru the numbers in detail.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website at
5:00 Friday. Total US 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.
-Friday the S&P 500 dropped about 0.8% to 3427.
-VIX slipped about 8% to 30.75.
-The yield on the 10-year Treasury rose to 0.721%.
My Panic Indicator is based on a statistical analysis
that calculates standard deviation each day. A huge jump higher can signal the
start of a correction. That’s the Panic Indicator. It can also be triggered at
a big-move down, then it becomes a bottom-indicator. It warned Thursday. Thursday
was clearly not a bottom (the Index is still stretched way above its 200-dMA).
We have to respect the past history for this indicator – we are now in a
correction with more downside likely to follow. Could the dip-buying, Fed
Fueled, newbies save the day? Maybe, but I doubt it.
Here’s the Friday run-down of some important indicators.
These tend to be both long-term and short-term so they are somewhat different
than the 20 that I report on daily.
BULL SIGNS
-The 5-10-20 Timer System remained BUY, because the
5-dEMA and 10-dMA are above the 20-dEMA.
-The smoothed advancing volume on the NYSE is still
bullish.
-Cyclical Industrials (XLI-ETF) are outperforming the
S&P 500.
-MACD of stocks advancing on the NYSE (breadth) made a bullish
crossover 3 Sept. (This is probably in response to the strong up move to the recent
top. I expect this indicator will switch
to bearish again if the market continues down.)
-The 50-dMA and the
100-dMA of the % of stocks advancing on the NYSE (Breadth) is above 50%.
-The S&P 500 is still outperforming the Utilities ETF
(XLU). It has been falling, but I’ll keep it in the bull column. Seems like no
one wants to own utilities now.
-57% of the 15-ETFs that I track have been up over the
last 10-days – bullish.
NEUTRAL
-The size of up-moves has been smaller than the size of
down-moves over the last month, but not small enough to send a signal.
-Overbought/Oversold Index, a measure of advance-decline
data is neutral.
-Non-crash Sentiment is neutral.
-The Fosback High-Low Logic Index is neutral.
-There have been 13 up-days over the last 20 days.
Neutral
-We’ve seen 7 up-days over the last 10-days. Neutral
-Bollinger Bands.
-RSI.
-VIX was bearish yesterday, but switched to neutral today.
-The 10-dMA of stocks
advancing on the NYSE (Breadth) is above 50%.
BEAR SIGNS
-Statistically, the S&P 500 gave a panic-signal, 3 September.
A panic signal usually suggests more to come.
(This signal can also occur at bottoms, but 3 Sept was NOT a bottom.)
-The Top Indicator, Breadth on the NYSE vs the S&P
500 index, diverged from the S&P 500 index and has been giving a sell
signal since 1 Sept.
-The Smart Money (late-day action) is mildly bearish.
This indicator is based on the Smart Money Indicator (a variant of the
indicator developed by Don Hayes).
-MACD of S&P 500 price made a bearish crossover 4
September.
-The S&P 500 is 10.8% above its 200-dMA. Values in
the 10-15% range are sell-signal. When Sentiment is considered, that signal is
bearish, too.
-Only 2.3% of all issues traded on the NYSE made new,
52-week highs when the S&P 500 made a new all-time-high, 28 Aug. Recent
new-highs have shown an extremely narrow advance.
-Long-term new-high/new-low data is neutral.
-Short-term new-high/new-low data is bearish.
-My Money Trend indicator is
bearish.
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 9
bear-signs and 7 bull-signs. Last week, there were 11 bear-signs and 5 bull-signs.
My guess is that indicators improved because of the
extreme buying. Basically, over the last 10-days we had 8 days of extreme bullishness and 2 days of
the bear. It is not surprising to see that some indicators have not yet turned.
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 remained+14. (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, i.e., they are not top-indicators, so
they are not as bearish as one might expect.
I remain bearish in the short and intermediate term. I have
a small short position in the Nasdaq 100 - more for fun than profit. I may
increase the position to something more meaningful, but I’d like to see more
bearish confirmation. We didn’t get that 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…
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.
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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.
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 current stock allocation is about 30% invested in
stocks. You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance. 30% is a very conservative position that I
re-evaluate daily. The XLE has been a loser for me since I was too early. It is
still yielding over 10%, so I have to remind myself to be patient.
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%; had we seen a successful retest of the bottom, 80% would not
have been out of the question.
