"This imaginary person out there - Mr. Market - he's
kind of a drunken psycho. Some days he gets very enthused, some days he gets
very depressed. And when he gets really enthused, you sell to him and if he
gets depressed you buy from him. There's no moral taint attached to that."
- Warren
Buffett
“The big money is not in the buying and selling. But in the
waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
NEW HOME SALES (Reuters)
“Sales of new U.S. single-family homes increased to their
highest level in more than 13-1/2 years in July as the housing market continues
to show strong immunity to the COVID-19 pandemic, which has plunged the economy
into recession and thrown tens of millions of Americans out of work. The
Commerce Department said on Tuesday new home sales rose 13.9%...” Story at…
CONSUMER CONFIDENCE (MarketWatch)
“Consumer confidence fell in August to a new pandemic low
after a fresh rash of coronavirus cases during the summer caused Americans to
turn more pessimistic about an economic recovery, according to a closely
followed survey. The index of consumer confidence sank to 84.8 this month from
a revised 91.7 in July…” Story at…
WHY THIS ISN’T 1920 (Real Investemtn Advice)
“No matter how many valuation measures you use, the
message remains the same. From current valuation levels, the expected rate
of return for investors over the next decade will be low. There is a large
community of individuals who suggest differently, as they make a case as to why
this “bull market” can continue for years longer. Unfortunately, any
measure of valuation does not support that claim.” Commentary at…
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
at 7:00 Tuesday. Total US numbers are on the left axis. I’ve plotted the daily
numbers on the right side of the graph with a 10-dMA of daily numbers in Green.
-Tuesday the S&P 500 rose about 0.4% to 3444, another
all-time high.
-VIX slipped about 1% to 22.13.
-The yield on the 10-year Treasury rose to 0.688%.
We keep seeing signals that the rally is suspect. At
today’s S&P 500 all-time high, only 2.7% of issues on the NYSE
make 52-week, new-highs. That’s a bearish number only a bit higher than last Friday.
Friday only 2.2% of all issues traded on the NYSE made
new-highs. The 5-year average shows that 6.7% of NYSE issues typically make new
highs at an S&P 500 new, all-time high. The last time we saw a value close
to 2.2% (2.3% on 21 May 2015) the S&P 500 was at a top that preceded a 12%
correction. In Sept 2018, 2.9% of issues
on the NYSE made new-highs. That top
preceded a 20% correction. (My numbers are slightly different than some since I
calculate the % ignoring issues that are unchanged in price.)
The lack of leadership is an important stat, because it
shows that a lot of the market is already falling. Another way to look at
breadth shows the same problem. Only 48% of issues on the NYSE advanced in the
last 2-weeks. Stated another way, more than half the issues on the NYSE have
fallen over the last 2 weeks and the market keeps powering higher – not likely
to last much longer.
The S&P 500 is 11.9% above its 200-dMA. Values in the
10-15% range are a sell-signal. While this could signal a major top, it could
presage just a 3-5% pullback. The Index was 11.5% above its 200-day when the
Coronavirus crash began. It was 8.6% above its 200-day before the 6% retreat in
July of 2019. The “%-above-the-200-day” is pretty strong signal and it suggests
that we will see at least some choppy trading and perhaps a more significant pullback.
The daily sum of 20 Indicators declined from -1 to -2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations slipped from +19 +6. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term.
Perhaps a final top will be signaled by overbought Bollinger
Bands and RSI. They are both close to
overbought now. Still, I remain bearish in the short and intermediate term.
How long can the market hold on before it falls??
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)
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…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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.
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.
