April 5, 2020 — Market Marks Time After Prior Week Big Rally

NASDAQ 7373.08  -1.72% for the week

Market Performance

This was one of the less volatile and more constrained weeks based on the daily range of price swings in the major averages compared to the two prior weeks, where the DJIA swung  over 1000 points on over 50% of the days.

For the week and year-to-date, the market has come off its recent high point on Tuesday and remained in a tight trading range Wednesday through Friday.  See the NASDAQ Composite Chart below. The NASDAQ Composite is now 18% from its 100-dma (Indicator #2) and it will quite a rally to get back to that level.  Also, the 200-dma is 13.8% away, still quite a stretch.

For the:               WEEK           2020 YTD          

NASDAQ            -1.72%       – 17.83%    

DJIA                    -2.70%       – 26.23%    

S&P 500              -2.08%       – 22.97%     

BDH Strategy      -2.42%       –   9.11%     

BDH Strategy Comes Through In This Fastest 30% Bear Market In History 

The BDH strategy has lost 9.11% year-to-date.  This is 8.7 to 17 percentage points less than the three major averages. Our strategy will always lose less in corrections and bear markets, since it uses the technical tools to identify trend changes and exit before the damage gets out of hand.  Getting out of the market before major damage has occurred is worth tens of thousands of dollars to investors to protect capital.  The BDH strategy may not do as well in bull markets, but that is not the ultimate goal of investing.  At the end of the day all that matters is how much our portfolios are worth in our investing time horizon over both bull and bear markets.  The worst situation occurs when scared investors sell at market bottoms and don’t get back in at all or much later after most of the market rally is behind them.

Market Internals Remain at Extremely Low Levels Seen at Major Market Bottoms

The percentage of the NYSE stocks above their 200-dma decreased slightly to 6.13% from 6.33% the prior week.  More importantly, the percentage of NYSE stocks above their 50-dmas also rose slightly to 5.29% from 4.77% the prior week. Both these indicators are still at levels that occur at severe bear market bottoms and need to greatly improve to indicate that we are making progress to recovery which can take months.

On a positive note, the number of new 52-week NYSE new lows shrunk  to 284 from 894 the prior week and  from 2,714 and  2,536 the two prior weeks.  This is a very positive trend in a market that has a quick bounce off the March 23 lows.

For the week, GLD (Gold) skyrocketed stood still gaining ).26% after a big drop early in the week. GDX (gold miners) rebounded another  2.38% for its third consecutive weekly advance. USO finally rebounded this week with an astonishing gain of 31.99% its largest daily gain ever after falling 9.51% a week earlier, and  losing 29.02% and 20.3% the two prior weeks.   TLT, a 20-year treasury bond, continues to  power ahead gaining 0.62% this week up 21.68% for the year.

BDH DASHBOARD – “3” BUY  Signal Remains in Place

On March 26, both Indicators #5 and #8 issued BUY signals, with both the faster and slower MACD crossing over to the upside.  This is still the case.  Note that the faster MACD on the chart a few pages above is getting close to possibly crossing on the downside.  This will not trigger a signal if crossed, as we will wait for the slow MACD to confirm that move.

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator  gave its last SELL on March 5, 2020.  Its last BUY signal was on October 14, 2019.  Refer to $comp chart below.  Notice that the current NASDAQ price is still 18% away from a BUY signal on this indicator.

Indicator #5 NASDAQ Composite with MACD.  This indicator had a BUY signal on March 26, 2020. (See second t chart below).

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest April 1, 2020 Bullish Percentage reading was 34.2% up 1.3 percentage points from the previous week.  This indicator is still on its long-term buy signal, and never went to a sell signal even with this massive sell-off.

Indicator #8 NASI Summation Index and MACD.  This indicator issued a BUY signal on  Thursday, March 26, 2020.  Refer to $NASI chart below.

Top 5 ETFs –20% Invested and 80% Cash

On Thursday March 26, I emailed subscribers two interim updates with a recommendation to buy five ETFs with a 10% position each as we had a “3” Dashboard  BUY signal.  They were purchased at the opening price on March 27: HACK, TAN, XHB, SMH and ARKK.  I set an intra-day stop LIMIT at 5% for each one.

None of these ETFs has a “pass” rating on etfscreen.com as they were still well off there prior highs.  So I selected a diversified few that were doing well the last week or so and had the best performance.  This is not the normal approach, but we are not in normal circumstances.  If you prefer to invest in other ETFs that is certainly your call based on your risk tolerance and diversification needs.

On April 1, TAN, SMH, and ARKK all hit their intra-day stop limits and were sold. HACK was not below its stop LIMIT so it was retained.  XHB opened April 1 below its stop LIMIT and never reached it during the day, so it remained in the portfolio.  I left it in the portfolio expecting a rebound, but it has declined further, now down 13.63%.  I am putting in a stop LIMIT at $23.98 with its current price at $26.48.  The portfolio is now 80% in cash, and HACK and XHB have 10% invested in them.

BDH Decision Page – BDH Dashboard ETFs 

The link: https://www.etfscreen.com/buydonthold/bdh-decision-page.php

On ETFscreen.com, the BDH Decision Page indicated that only 1 ETFs (TLT) out of 46 has a “pass” ratings which was the fourth week in a row of this occurrence, showing the  massive internal market price deterioration will take time to be repaired .  Interestingly, TLT was the best 1-month and 3-month performer of all the 46 ETFs in our universe.

You can easily check the top performers for the past 5-days and one month by going to the “Additional Fund Stats” tab on the right side of the BDH Decision Page, and arraying the Rtn-5d and Rtn-3mo column, respectively heading from high to low.  If you check the performance over the past five days by hitting the down carat you will note that the best performing ETFs in our 46 ETF universewere XOP, XLE, XLP, XLV and EWC.  The five best over the past month were: TLT, BOND, TBF, XLP, and XLV.

Dark   Liquidity

The link is as follows:

www.dark-liquidity.com/index.php/strategies

The BDH strategy is now ranked 7th the same ranking from the prior week.   The dark-liquidity table shows the current portfolio and all the year-to-date buys and sells.

Game Plan Going Forward – Potential Extreme Danger Ahead

Currently, we are in an   unstable market with volatility still high, but not the extreme levels of the two prior weeks.  The bottom may have been made intra-day on Monday, as I’ve stated for the past four weeks, only to be proven wrong.  On Monday March 23, the NASDAQ Composite hit a 6631 intra-day low, about 50 points lower than the intra-day low on March 18, both shown by the two red arrows to charts above.  So the March 23 low may be the final low or the final low may not come until a few weeks or months down the road, as was the case in 1987 and 2008-2009. At the minimum, NASDAQ Composite needs to close above 7800 or 5.8% higher before we consider using any of our 80% cash position.  Exceeding that level would surpass the closing highs of March 26 through 28, and open up a possible run to the 200-dma.

Interim updates are sent to subscribers during the week, as needed.     Any subscriber who has recently sent in a payment and has not received this regular blog today should email me at lesmasonson@yahoo.com so I can check my records and correct any oversight.

Remember that you are responsible for your investments and how you manage them. This website was developed for educational purposes only and is not responsible for any actions you take with your investments.  If you decide to follow the BDH strategy, then you are 100% responsible for your investment outcome.  Make sure to check the BDH indicators daily during times when the market is volatile like now.  Just bookmark the charts above and look for any signal changes.  I will provide interim Dashboard signal changes as they occur to the best of my ability. It is important to be pro-active, so as not to miss any Dashboard signals. Decide on and place your stop LIMITS or stops that meet your own risk profile.

Les

Leslie N. Masonson, MBA, CCM, is President of Cash Management Resources, a financial consulting firm that he founded in 1987. He is an ETF Strategist and currently actively trades ETFs on a daily basis Masonson’s 47-year working career has spanned financial advisory services, trading, investing, banking operations management, teaching, and cash/treasury management consulting. He was a Financial Advisor for six years offering investment management services to retail clients. Much earlier, he worked at three large banks for a total of 17 years as a Vice President at Citibank, an Assistant Vice President at Bank of America, and an Assistant Secretary at Irving Trust Company. He has written more than 140 articles – interviews with traders, software product and book reviews – for numerous financial publications including Technical Analysis of Stocks & Commodities (TASC), Active Trader, SFO and Futures magazine, as well as on Amazon. He has lectured on investing on several cruise lines including Crystal, Celebrity, and Norwegian. In November 2003, he spoke at the Intershow Online Investor’s Expo, on “Successfully Trading Stocks for a Living.” As of September 2016, he has been the ETF Columnist for TASC. Masonson has been researching and investing in the stock market for 60 years. He has invested in mutual funds, stocks, options, futures, ETFs, and commodities. Masonson has read more than 625 books on investing and trading, and he is proficient in technical analysis. He has used many investing and trading software programs over the years, including Telescan, OmniTrader, DTN, TradeStation, ULTRA, VectorVest, High Growth Stock Investing, TheWizard, and ETFReplay.com, as well as many brokerage charting programs including Fidelity Active Trader, Think or Swim, Interactive Brokers Trader Workstation, and Schwab’s StreetSmart Edge. He has been interviewed on business radio stations, as well as on cable TV on the Financial News Network and CNBC. The Wall Street Journal, USA Today, Institutional Investor, Bottom Line/Business, Inc., Las Vegas Review-Journal, and Advertising Age have interviewed him. His latest book Buy DON’T Hold: Investing with ETFs Using Relative Strength to Increase Returns with Less Risk was published in May 2010. He has previously authored the following books: All About Market Timing: The Easy Way to Get Started, (McGraw-Hill, November 2003 and translated into Chinese in February 2010) as well as the Second Edition published in April 2011, Day Trading On The Edge: A Look-Before-You-Leap Guide to Extreme Investing, (AMACOM, 2000), Cash Cash Cash: The Three Principles of Business Survival and Success, (Harper Business, 1990), Corporate Cash Management: Techniques and Analysis, (Dow-Jones Irwin, 1985. Co-edited with Frank Fabozzi), and the Corporate Treasury Management Manual (A.S. Pratt & Sons, 1998. Editor and Contributor). In April 2011, his first ebook was published with the title Profiting from ETF Rotation Strategies in Turbulent Markets. Masonson received a BBA in Finance and Investments from The City College of New York and an MBA in Operations Research from Bernard M. Baruch College. His master’s thesis title was “Statistical Evaluation of the Relative Strength Concept of Common Stock Selection.”

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