Earnings ... Biden’s Stimulus Will Inflate the Bubble – More … Another Sign the Market is Nuts ... The Boom in Fraud ... Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“The big money is not in the buying and selling. But in the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway

 

“Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” - David Einhorn, Greenlight hedge fund.

My cmt: The 2 Sept high was 3581, so it looks like David Einhorn was too early.

 

EARNINGS (FACTSET)

“At this point in time, more S&P 500 companies are beating EPS estimates for the fourth quarter than average, and beating EPS estimates by a wider margin than average. As a result, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. Despite the increase in earnings, the index is still reporting a year-over-year decline in earnings, mainly due to the negative impact of COVID-19 on a number of industries within the index. But, if earnings continue to surpass estimates at current levels, it is likely the index will report year-over-year earnings growth for the quarter for the first time since Q4 2019.” Analysis at...

https://insight.factset.com/sp-500-earnings-season-update-january-22-2021

 

BIDEN’S STIMULUS WILL INFLATE THE BUBBLE EVEN MORE (Business Insider)

“Legendary investor Jeremy Grantham warned investors during a Bloomberg interview that the $1.9 trillion in federal aid President Joe Biden is seeking from Congress will further inflate the stock market bubble...When you have reached this level of obvious super-enthusiasm, the bubble has always, without exception, broken in the next few months, not a few years," Grantham told Bloomberg. Story at...

https://markets.businessinsider.com/news/stocks/jeremy-grantham-bidens-stimulus-will-inflate-the-stock-market-bubble-2021-1-1029995954

 

ANOTHER SIGN THE MARKETS HAVE GONE NUTS (MarketWatch)

“This spike in margin debt over the past few months is another sign that markets have gone nuts, and everyone is chasing everything, regardless of what it is, whether it’s a penny stock with a similar name to something [Tesla Chief Executive] Elon Musk mentioned in a tweet, or whether it’s Tesla’s stock itself, or any of the EV [electric-vehicle] makers or presumed EV makers that might never mass-produce EVs, or even a legacy auto maker that is now touting its EV investments, or whatever it is, including bitcoin — which exploded higher, before plunging 28% in two weeks.” Story at...

https://www.marketwatch.com/story/heres-another-sign-that-markets-have-gone-nuts-and-everyone-is-chasing-everything-11611315309

 

CREDIT BUBBLE WEEKLY COMMENTARY EXCERPT (The Credit Bubble Bulletin)

“My biggest fear is materializing. When this historic Bubble bursts, a major crisis will unfold with our nation’s finances in complete shambles. The Fed’s “money printing” operation has gone parabolic as it desperately attempts to sustain an unsustainable Bubble. Treasury debt growth has gone parabolic as Washington tries to sustain an unsustainable economic structure. The system is on a trajectory that ensures a crisis of confidence – and I don’t see this as some long-term concern. This is an issue of short-term sustainability...” – Doug Noland.

...Bloomberg (Michael Msika): “Bank of America Corp. strategists warned the ‘extreme rally’ on Wall Street that has pushed stocks to record highs, fueled by strong U.S. policy stimulus, is forming a bubble in asset prices. ‘D.C.’s policy bubble is fueling Wall St’s asset price bubble,’ strategists led by Michael Hartnett wrote… ‘When those who want to stay rich start acting like those who want to get rich, it suggests a late-stage speculative blow-off.’ The strategists predict a market correction and for positioning to peak in the first quarter, with the BofA Bull & Bear Indicator closing in on a ‘sell signal.’” Commentary at...

http://creditbubblebulletin.blogspot.com/

 

THE BOOM IN FRAUD – WHAT IT SAYS ABOUT THE CURRENT MARKET (The Felder Report)

“...how much fraud is yet to be uncovered? It took the Dotcom bust to reveal Enron and Worldcom as frauds. It took the Great Financial Crisis to reveal rampant mortgage fraud and the Bernie Madoff fraud...we won’t know the full extent [of fraud in this cycle] until the next major bear market arrives. However, I think it’s already clear that the level of greed stimulated during the current mania is, like many other things right now, unprecedented.” Commentary at...

https://thefelderreport.com/2021/01/20/what-the-boom-in-fraud-says-about-the-current-market-environment/

See Jesse Felder’s blog for examples of recent fraud.

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 8:20pm Monday. US total case 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 0.4% to 3855.

-VIX rose about 6% to 23.19.

-The yield on the 10-year Treasury closed at 1.043%.

 

Monday was a split day for the Indices:    

UP: NASDAQ, S&P 500

DOWN: DJIA, Russell 2000, NYSE Composite.

More stocks were down than up.

 

The S&P 500 closed 15.8% above its 200-dMA. A clear bearish sign. RSI finally moved very close to a sell.  Volume was huge today - frenzied comes to mind. Bollinger Bands are not now a sell, but they are close. Looks like we are close to an intermediate top.  When RSI and Bollinger bands are overbought, we may finally see some retreat in the markets.

 

I have 10 indicators focused on top/bottom calls. The only indicator warning of a top is the %-above the 200-dMA.The New-high/New-low indicators (long-term and short-term) are actually giving Buy-signals so there are now more bottom-signals than top-signals!  The New-High/New-Low data will need to get closer to reality, too, before we see a drop.

 

The daily sum of 20 Indicators declined from -2 to -6 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +5 to -6. (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.

 

The Long Term NTSM indicator ensemble remained HOLD. Volume, Price, VIX & Sentiment are neutral. I still think we are near a short-term top based on % over the 200-dMA and a couple of other indicators.

 

I’ll continue to keep a low % of funds in the stock market until I see a better buying point.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

MONDAY 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 markets have not retested the lows on recent corrections and that has left me under-invested on the bounces. I will need to put less reliance on retests in the future.

 

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%; if a correction is deep enough, 80% would not be out of the question.

IHS Flash Manufacturing and Services PMI ... Existing Home Sales ... Crude Inventories ... Investor Surveys Suggests Top … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“The big money is not in the buying and selling. But in the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway

 

“Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” - David Einhorn, Greenlight hedge fund.

My cmt: The 2 Sept high was 3581, so it looks like David Einhorn was too early.

 

IHS MARKIT MANUFACTURING / SERVICES PMI – FLASH (Reuters)

“Data firm IHS Markit said on Friday its flash U.S. manufacturing PMI accelerated to a reading of 59.1 in the first half of this month, the highest since May 2007, from 57.1 in December...its flash services sector PMI increased to 57.5 from 54.8 in December, the pace of new business growth softened at the start of 2021.” Story at...

https://www.reuters.com/article/us-usa-economy-pmi/us-factory-activity-races-to-more-than-13-1-2-year-high-in-early-january-ihs-markit-idUSKBN29R1T6

 

EXISTING HOME SALES (Yahoo Finance)

“Home sales activity ticked up in the final month of 2020 and annual sales activity reached its highest levels since 2006. Existing home sales increased 0.7% to 6.76 million in December...” Story at...

https://finance.yahoo.com/news/existing-home-sales-hit-december-2020-150355680.html

 

EIA CRUDE INVENTORIES (EIA)

“U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.4 million barrels from the previous week. At 486.6 million barrels, U.S. crude oil inventories are about 9% above the five year average for this time of year.” Press release at...

https://ir.eia.gov/wpsr/wpsrsummary.pdf

 

INVESTOR SURVEY SUGGESTS A TOP (McClellan Financial Publications)

“NAAIM Exposure Index now stands at 112.93, meaning that on average the group holds a leveraged long position in the stock market.  This is the second highest weekly reading ever, going back to the start of the data in 2006.  Generally speaking, high readings like this mean that investors are really bullish, which is a sign of a market top.  Even though these investment managers are professionals, they are still subject to crowd-like behavior.” – Tom McClellan. Commentary at...

https://www.mcoscillator.com/learning_center/weekly_chart/looking_deeper_at_the_naaim_survey_data/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5:50pm Friday. US total case 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

-Friday the S&P 500 slipped about 0.2% to 3847.

-VIX rose about 0.4% to 21.40.

-The yield on the 10-year Treasury slipped to 1.086%.

 

Here’s today’s 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 10-dMA of stocks advancing on the NYSE (Breadth) is above 50%

-The 50-dMA % of stocks advancing on the NYSE (Breadth) is above 50%.

-The 5-10-20 Timer System is BUY; the 5-dEMA and the 10-dEMA are above the 20-dEMA. 

-The Fosback High-Low Logic Index is very bullish. (We’ve seen high new-highs and low new-lows.)

-MACD of S&P 500 price made a bullish crossover 20 January.

 

NEUTRAL

-Long-term new-high/new-low data flat

-The 100-dMA of the % of stocks advancing on the NYSE (Breadth) is above 50%. However, it is falling.

-Short-term new-high/new-low data is flat.

-Non-crash Sentiment indicator remains neutral, but it is too bullish and that means it is leaning bearish.

-Statistically, the S&P 500 gave a panic-signal, 28 October. This usually means more downside to come, but the bear-signal has expired.

-The size of up-moves has been smaller than the size of down-moves over the last month, but not enough to send a signal.

-VIX is relatively flat.

-Bollinger Bands.

-Overbought/Oversold Index (Advance/Decline Ratio).

-6 Jan, the 52-week, New-high/new-low ratio improved by 4.3 standard deviations – very bullish and also rare. Signal has expired.

-We’ve seen 6 up-days over the last 10-days. Neutral.

-There have been 14 up-days over the last 20 days. Neutral

-The market has broadened out; 6.7% of all issues traded on the NYSE made new, 52-week highs when the S&P 500 made a new all-time-high on 8 Jan. (there is no bullish signal for this indicator.)

-RSI.

-Breadth on the NYSE compared to the S&P 500 index is neutral.

-My Money Trend indicator is flat.

-51% of the 15-ETFs that I track have been up over the last 10-days – neutral.

-The S&P 500 is outperforming Utilities ETF (XLU), but the outperformance is falling, so I’ll call this one neutral.

 

BEAR SIGNS

-The smoothed advancing volume on the NYSE is falling.

-The Smart Money (late-day action) is selling. This indicator is based on the Smart Money Indicator (a variant of the indicator developed by Don Hayes).

-Cyclical Industrials (XLI-ETF) are underperforming the S&P 500.

-McClellan Oscillator is below zero.

-The S&P 500 is 15.5% above its 200-dMA. (Sell point is 12%.) When Sentiment is considered, the signal is also bearish.

-Slope of the 40-dMA of New-highs is falling, but just barely.

-MACD of the percentage of stocks advancing on the NYSE (breadth) made a bearish crossover 21 Jan.

 

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 7 bear-signs and 5 bull-signs. Last week, there were 8 bear-signs and 6 bull-signs.

 

There was not much change in indicators over the week. The bull/bear ratio declined slightly, but probably not enough to mean much.

 

The daily sum of 20 Indicators improved from -4 to -2 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +15 to +5. (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.

 

The Long Term NTSM indicator ensemble remained HOLD. Volume, Price, VIX & Sentiment are neutral. I still think we are near a short-term top based on % over the 200-dMA and a couple of other indicators.

 

I’ll continue to keep a low % of funds in the stock market until I see a better buying point.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

FRIDAY MARKET INTERNALS (NYSE DATA)

Market Internals slipped to 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 markets have not retested the lows on recent corrections and that has left me under-invested on the bounces. I will need to put less reliance on retests in the future.

 

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%; if a correction is deep enough, 80% would not be out of the question.

Jobless Claims ... Housing Starts ... Philadelphia FED Index … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“The big money is not in the buying and selling. But in the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway

 

“Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” - David Einhorn, Greenlight hedge fund.

My cmt: The 2 Sept high was 3581, so it looks like David Einhorn was too early.

 

JOBLESS CLAIMS (AP News)

“The number of Americans seeking unemployment benefits fell slightly last week to 900,000, still a historically high level that points to ongoing job cuts in a raging pandemic.” Story at...

https://apnews.com/article/us-jobless-claims-900k-973c86db9969a4f0f9d59fc81853e703

 

HOUSING STARTS (Yahoo Finance)

“Demand for homes remains sky high, despite the still-raging pandemic, as people look to take advantage of historically low mortgage rates and find their next home.”  Story at...

https://finance.yahoo.com/news/december-housing-starts-capping-off-134114726.html

 

PHILADLPHIA FED INDEX (Nasdaq.com)

“A report released by the Federal Reserve Bank of Philadelphia on Thursday showed a substantial acceleration in the pace of growth in regional manufacturing activity in the month of January. The Philly Fed said its diffusion index for current activity soared to 26.5 in January...”  Story at...

https://www.nasdaq.com/articles/philly-fed-index-rebounds-much-more-than-expected-in-january-2021-01-21

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 5:40pm Thursday. US total case 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

-Thursday the S&P 500 rose about 1pt to 3853.

-VIX dipped about 1% to 21.32.

-The yield on the 10-year Treasury rose to 1.113%.

 

New-52-week highs remain very high with almost no new 52-week-lows.  That’s the “tell” for this market. Until it changes, we are likely to see more new highs.

 

The daily sum of 20 Indicators declined from zero to -4 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +20 to +15. (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.

 

The Long Term NTSM indicator ensemble remained HOLD. Volume is bullish: Price, VIX & Sentiment are neutral. I still think we are near a short-term top based on % over the 200-dMA and a couple of other indicators.

 

The last time the markets go this stretched was back in 2009 after the March bottom that followed the multi-year Financial crash. The problem is that at the current time PEs are very stretched while in 2009, they were very low. I am not in a hurry to invest more funds in the stock market.

 

I’ll continue to keep a low % of funds in the stock market until I see a better buying point.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

We note the banks have moved into 1^st and 2^nd place in DOW momentum. I lean toward JPM due to its higher dividend yield, 2.6%. Bank should do well as interest rates rise, although I’d expect rates to fall if we see a decent pullback.

 

THURSDAY MARKET INTERNALS (NYSE DATA)

Market Internals slipped to 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 markets have not retested the lows on recent corrections and that has left me under-invested on the bounces. I will need to put less reliance on retests in the future.

 

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%; if a correction is deep enough, 80% would not be out of the question.

Euphoria in the Stock Market … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“The big money is not in the buying and selling. But in the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway

 

“Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” - David Einhorn, Greenlight hedge fund.

My cmt: The 2 Sept high was 3581, so it looks like David Einhorn was too early.

 

EUPHORIA IN THE STOCK MARKET (CNBC)

“Billionaire investor Leon Cooperman told CNBC on Wednesday he believes the stock market will struggle to generate meaningful returns in the years ahead...“Whenever you bought into the market when it was selling at the present multiple of, say, 22 times or higher, you’ve never really made any serious money one year, three year, five years out. I think that’s what we’re looking at...” Story at... 

https://www.cnbc.com/2021/01/20/leon-cooperman-sees-euphoria-in-parts-of-market-skeptical-on-long-term-outlook.html

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 6:30pm Wednesday. US total case 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

-Wednesday the S&P 500 rose about 1.4% to 3852.

-VIX dropped about 7% to 21.58.

-The yield on the 10-year Treasury dipped to 1.083%.

 

In 1998, I was convinced the markets were getting overheated. I sold out as the markets headed higher.  They kept going up and I began to second guess myself.  I bought back in on 31 August at the bottom of a 20% correction. I didn’t have a system back then it was all feel. Now, I see some warning signs. Probably the biggest is that the S&P 500 is still stretched at 16.3% above its 200-dMA (Sell point is 12%.). We could easily see a 1998 event again.

 

The last time the markets go this stretched was back in 2009 after the March bottom that followed the multi-year Financial crash. The problem is that at the current time PEs are very stretched while in 2009 they were very low. I am not in a hurry to invest more funds in the stock market.

 

Today was a statistically significant up-day. That just means that the price-volume move exceeded my statistical parameters. Data shows that a statistically-significant, up-day is followed by a down-day about 60% of the time.  Statistically-significant, up-days almost always coincide with tops, but not all statistically-significant, up-days occur at tops. Today could be a top, but other than the market being stretched, there aren’t too many top indicators. There are fewer now than there were on 8 January and I thought that was a top! Bollinger Bands were overbought then; they aren’t now, but they are close.

 

The daily sum of 20 Indicators declined from +4 to zero (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +13 to +20. (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.

 

The Long Term NTSM indicator ensemble remained HOLD. Volume is bullish: Price, VIX & Sentiment are neutral. I still think we are near a short-term top based on % over the 200-dMA and a couple of other indicators.

 

I’ll continue to keep a low % of funds in the stock market until I see a better buying point.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

We note the banks have moved into 1^st and 2^nd place in DOW momentum. I lean toward JPM due to its higher dividend yield, 2.6%. Banks should do well as interest rates rise, although I’d expect rates to fall if we see a decent pullback.

 

WEDNESDAY MARKET INTERNALS (NYSE DATA)

Market Internals remained BULLISH 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 markets have not retested the lows on recent corrections and that has left me under-invested on the bounces. I will need to put less reliance on retests in the future.

 

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%; if a correction is deep enough, 80% would not be out of the question.

 

 

What Were They Thinking? – Extreme Valuations … Hussman Market Commentary Excerpt ... … Coronavirus (Covid-19) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.

 

“The big money is not in the buying and selling. But in the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway

 

“Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” - David Einhorn, Greenlight hedge fund.

My cmt: The 2 Sept high was 3581, so it looks like David Einhorn was too early.

WHAT WERE THEY THINKING? (The Felder Report)

Here’s what Scott McNeely, then CEO of Sun Microsystems, said during the dot.com crash 20 years ago:

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”

 

“Indeed, what were investors thinking 20 years ago not only paying 10 times revenues for Sun Microsystems but also paying that ridiculous multiple for 44 other stocks in the S&P 500 Index? ...It’s interesting to note that we seem to have found even more fools today than we did back then. Nearly 60 of the S&P 500 Index components currently trade more than 10 times revenues [see above chart].” – Jesse Felder, The Felder Report at...

https://thefelderreport.com/wp-content/uploads/2021/01/Screen-Shot-2021-01-04-at-11.25.19-AM.png

 

HUSSMAN COMMENTARY EXCERPT (Hussman Funds)

“Though our most reliable measures of market valuations presently exceed levels observed at both the 1929 and 2000 market peaks, there’s no assurance...[that now]...is the peak of a cyclical bull market. What I can say with reasonable confidence is that present conditions – a combination of record valuations, “overvalued, overbought, overbullish” conditions, the current degree of overextension, and critically, fresh deterioration in our key gauge of market internals – are permissive of steep and abrupt market losses.

Put simply, the present constellation of market conditions creates the potential for the sort of “trap door” situation we observed in March. Still, an improvement in our measures of market internals would ease this risk, and could even create a constructive opportunity if improved market internals are first preceded by a material retreat in market valuations.” – John Hussman, Phd.

https://www.hussmanfunds.com/comment/mc210118/

 

CORONAVIRUS (NTSM)

Here’s the latest from the COVID19 Johns Hopkins website as of 6:30pm Tuesday. US total case 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

-Tuesday the S&P 500 rose about 0.8% to 3799.

-VIX dropped about 5% to 23.24.

-The yield on the 10-year Treasury rose to 1.097%.

 

The first sign of a major stock market crash is in place. Valuations are extreme.  The second, Sentiment, is also nearly at extreme warning levels. I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in Rydex/Guggenheim mutual funds. On a standard deviation basis, values have not reached the extremes seen during the dot.com crash, but they are close. 2 other elements, (bad economy, negative FED) that might precede major stock market crash are not here yet.

 

(1) The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2020 is 7.4 percent on January 15. (2) The FED is pumping liquidity like crazy. Until that slows, we probably don’t have to worry about a major stock market event, except for some news-driven, unforeseen event.

 

I said over the weekend that it looked like the S&P 500 had made a short-term top.  It wasn’t a strong signal and a new high in the near term would cancel my top call.  We’ll see. The S&P 500 is still stretched at 14.9% above its 200-dMA (Sell point is 12%.), but indicators improved on the strong positive day.

 

The daily sum of 20 Indicators declined from -5 to +4 (a positive number is bullish; negatives are bearish). The 10-day smoothed sum that smooths the daily fluctuations declined from +6 to +13. (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.

 

The Long Term NTSM indicator ensemble remained HOLD. Volume is bullish: Price, VIX & Sentiment are neutral. I still think we are near a short-term top based on % over the 200-dMA and a couple of other indicators.

 

I’ll continue to keep a low % of funds in the stock market until I see a better buying point.

 

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…

http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html

 

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.

For more details, see NTSM Page at…

https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html

 

We note the banks have moved into 1^st and 2^nd place in DOW momentum. I lean toward JPM due to its higher dividend yield, 2.6%. Bank should do well as interest rates rise, although I’d expect rates to fall if we see a decent pullback.

 

TUESDAY MARKET INTERNALS (NYSE DATA)

Market Internals improved to BULLISH 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 markets have not retested the lows on recent corrections and that has left me under-invested on the bounces. I will need to put less reliance on retests in the future.

 

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%; if a correction is deep enough, 80% would not be out of the question.