“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
DIVERGENCE / NON-DIVERGENCE (McClellan Publications)
“The drop from that Sep. 2 top has given us the
fulfillment of the big warning from the divergence. Okay, so what’s
next? The history shows us that a meaningful drop out of such a
divergence does not end after just a 3-day drop. Usually it lasts until
this indicator gets down close to the 30 oversold level, or even below
it. In either case, the implication for the moment right now is that
there is still more work to do.” – Tom McClellan. Commentary at…
ICARUS HAS FALLEN (Evil Speculator)
“Things are not looking so hot for equities at the
moment. In my Wednesday post I highlighted the notion that the strength of any
bounce that would eventually materialize serves as a litmus test for what the
fall season most likely has in store for us. Given the fact that two
consecutive rally attempts did not exceed the 100 handle mark and were met by
instant reversals does not bode well for the remainder of the month and going
into September.” Commentary at…
RIOTING RICH WHITE KIDS (ZeroHedge)
“When you hear about Black Lives Matter protests taking
place in New York City, you might expect those taking lead roles to be Black
people. It appears this isn’t necessarily the case, and some of
the worst damage and most violent ideologies are instead the products of
privileged white kids who are rampaging in the streets…So to be
clear, this rich kid wants to find vacant apartments and also forcibly evict
residents to give the homes to others she feels are more worthy of living in
them. She wants to defend this violently and has already been arrested for
destroying property. And she’s awaiting trial in her family’s luxurious second
home…So we have
more brainwashed, privileged kids touting communism who will one day hold
positions of power. Kids with these backgrounds will be on
boards of directors. They’ll hold corporate jobs. They’ll handle funds. But I’d
be willing to bet they won’t be turning over the keys to their own Upper East
Side co-ops if the opportunity rolls around to reallocate property. They’ll
just be coming after everyone else’s hard-earned property in the name of
“revolutionary strategy.” Story and photos at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 5:30 Monday. 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.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 1.3% to 3384.
-VIX fell about 4% to 25.85
-The yield on the 10-year Treasury rose slightly to 0.679%.
We noted last week that the S&P 500 Index has tested
the 50-dMA three times and held each time. It’s possible that we’ve seen an end
to the correction. We didn’t see much
evidence of that possibility on Friday. Today, the price action is an argument
for a “correction over” assertion, but just because the dip-buyers are buying doesn’t
mean that they are correct.
When we look at late-day action (the purview of the Pros)
we see that they have been selling over the last 2-weeks. Today, there was
significant buying at 3:30 and then selling at 3:45 into the close. At best,
today was neutral. We didn’t see much improvement in other indicators either.
Both MACD of Breadth and Price remain bearish and today
the 5-10-20 Timer System turned negative because both the 5-dEMA and the
10-dEMA dropped below the 20-dMA. That was “neutral” Friday.
XLI vs the S&P 500 is close to switching to bearish and
that indicator was bullish last week.
Bottom line: I suspect the correction is NOT over. Of
course, nothing is certain. We’ll see
what happens.
As of today, the S&P 500 is down 5.5% from its
all-time high. This is day 6 of the correction. The average time from top to
bottom for a correction is 35-days for corrections less than 10% and 68-days
for bigger corrections.
The Long Term NTSM indicator ensemble remained SELL.
Volume, Price and the Panic Indicator are bearish. It has been SELL for the
last 5 days.
The daily sum of 20 Indicators remained -8 (a positive
number is bullish; negatives are bearish). The 10-day smoothed sum that smooths
the daily fluctuations dropped from -24 to -36. (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’ll be watching for improvements in internals and
looking for a bottom. No bottom yet. If
past history is a guide, we may expect more than a 10% correction based on the
extreme narrow breadth at the top and the fact that the S&P 500 was 16%
above its 200-dMA at the top.
I remain bearish in the short and intermediate term. I
covered my small Nasdaq short, but I still hold a significant short position on
the S&P 500 (but not more than 15% of the stock-portfolio – I am retired;
no need to risk the nest egg).
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.
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained BEARISH 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.
