JOHNS HOPKINS COVID-19 GLOBAL CASE TRACKING TOOL (Johns
Hopkins)
See here…
THE MARKET DURING VIRUS EMERGENCIES (FACTSET/CNBC)
*Trading days shown above is from top to bottom.
Chart from CNBC at…
AMERICAN TRUCKING ASSOCIATION TONNAGE (ATA)
“American Trucking Associations’ advanced seasonally
adjusted (SA) For-Hire Truck Tonnage Index rose 0.1% in January after rising
0.5% in December. In January, the index equaled 117.4 (2015=100) compared with
117.3 in December. ATA recently revised the seasonally adjusted index back five
years as part of its annual revision. “Over the last two months, the tonnage
index has increased 0.6%, which is obviously good news” said ATA Chief Economist Bob
Costello. “However, after our annual revision, it is clear that
tonnage peaked in July 2019 and, even with the recent gains, is down 1.8% since
then. Softness in manufacturing and elevated inventories continue to weigh on
the truck freight tonnage.” Compared with January 2019, the SA index rose
0.8%, which was preceded by a 3.1% year-over-year gain in December.
PAUL SCHATZ COMMENTARY EXCERPT (Heritage Capital)
“On Thursday and at least the morning on Friday, stocks
are red and under pressure with the media blaming Corona. I get it. They have
to blame something. I think the quiet culprit has been the Japanese Yen which
has collapsed of late against the dollar…stocks are clearly under pressure. All
year, I have discussed the historic level of greed and euphoria in the market.
Stocks only needed a spark to begin a pullback. I don’t think this will be a
big one, but wiping out all of 2020’s gains would not be surprising.” Story at…
My cmt: Wiping out all of
2020’s advance would only be a 4.4% drop. We got it today! Ouch! (Paul wrote
his comments last week.)
LARRY ADAM COMMENTARY EXCERPT (Raymond James)
“Although the S&P 500 has notched 13 new record highs
this year (five occurring over the last two weeks) and is quickly approaching
our year-end target, key fundamentals should provide support moving forward and
mitigate the potential of a significant near-term pullback…We continue to favor
more cyclical sectors such as Technology and Communication Services, which
exhibit the best combination of attractive valuations and robust earnings
growth prospects.” Story at…
JOHN HUSSMAN FEBRUARY MARKET COMMENTARY EXCERPT (Hussman
Funds)
“If you want my opinion, that opinion is that current
hypervalued extremes are likely to be followed by market losses on the order of
two-thirds of value of the S&P 500, with negative S&P 500 nominal total
returns on both a 10-year and a 12-year horizon. We don’t rely on that outcome,
and we don’t require historically normal valuations as a precondition to
embracing market exposure (particularly in periods when market internals are
favorable), but that’s honestly what I expect. I recognize that the notion of a
two-thirds market loss (which would only take our most reliable valuation
measures to their run-of-the-mill historical norms) seems preposterous. Then
again, so did similar projections before the 2000-2002 and 2007-2009 collapses.”
– John Hussman, PhD.
My cmt: This commentary was made at the beginning of
February. Mr. Hussman is not calling for
a drop right now; but it was his expectation. I’ll try and remember to post a
Hussman comment in March.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 dropped about 3.4% to 3226.
-VIX jumped up about 47% to 25.03.
-The yield on the 10-year Treasury fell to 1.374.
When there’s trouble, investors often worry over the weekend
and sell on Monday. I had expected that we would see a selloff a week ago
Monday, but the boys waited a week. If
coronavirus wasn’t enough, there were double digit losses in healthcare stocks
because Bernie Saunders did well in Nevada. Bernie’s healthcare plan would do
away with all health insurance companies.
Indicators declined and the only bullish indicator from
Friday’s blog slipped to Neutral. Overall, the daily sum of 20 Indicators declined
from -7 to -14 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations declined from -1
to -16. (These numbers sometimes change after I post the blog based on data
that comes in late.) Most of these indicators are short-term.
We’ve been expecting a drop of 5-10% or so, but it’s
always a bit of a shock when the markets drop more than 3% in a day. The S&P 500 broke through its 50-dMA. As
of today, the Index is 4.7% off of its recent high. We note in the above chart of
past virus scares, the big ones have resulted in a drop of about 13%. A 13%
drop would take us to about 2945 on the S&P 500. That’s about 100 pts below the 200-dMA, currently
at about 3045.
The Johns-Hopkins website I provided above indicates that
COVID-19 has a death rate of about 10% (2,628 deaths vs 25,215 recovered). I
keep hearing that the actual number is lower because it doesn’t count people who
have a mild case and don’t go to the doctor. That may be; I am an Engineer not
a healthcare statistician. Even so, we may need to increase the estimate for a
drop in the S&P 500. My revised
guess is that a drop of 8-15% may be a reasonable guess for
S&P 500 declines.
The key may be to see if we get good news about COVID-19.
That could happen if we see a leveling off of cases in China. The worst case is
that virus fears could throw us into recession (leading to further declines).
While most think that won’t happen, no one has a crystal ball.
Next, I’ll be trying to identify a buying opportunity.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: 0
Most Recent Day with a value other than Zero: -1 on 21 February
(The S&P 500 was too far above its 200-dMA when sentiment is considered.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy
Sign.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market declines.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to NEGATIVE 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. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
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 45% invested in
stocks as of 27 January (down from 60%). This is a conservative position
appropriate for a retiree based on an overstretched S&P 500. You may wish to
have a higher or lower % invested in stocks depending on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VOLUME, VIX and Panic Indicators. gave a bear
signal; PRICE, and SENTIMENT Indicators were neutral. The Long-Term Indicator dropped to SELL. Since
the market is down less than 5%, I think it is still reasonable for
conservative investors to reduce equity percentages in their portfolios to
comfortable levels if they have not already done so. Preferably, one would sell
on a bounce upward. It looks like a lot of industries are going to be hurt by
this event.
