March 23 — Market Loses 13% for the Week

NASDAQ 6879.52 -995 or -12.84%for the week

Market Gives Back All Gains of Trump’s Presidency

Market Performance

This was another week for the record books with the DJIA cratering over 17% in this past week alone, the quickest trip south to a bear market in history, even faster than the 38% for the 8/25/1987 drop through October 19, 1987, “Black Monday” and the 43 days to the bottom in late 1929.  This was the worst week in the stock market since the October 2008 financial debacle.  Just in the past month the DJIA has declined a massive 35%.

 Moreover, the point and percentage moves up and down were stunning, as the following table depicts for the DJIA:

DATE DOW’S POINT CHANGE  FROM MARCH 16-20 DOW’S % CHANGE
March 16 -2997.10 -12.9%
March 17 +1048.86 +5.20%
March 18 -1336.46 -6.31
March 19 +188.46 +0.94%
March 20 – 913.21 -4.55%

Monday’s DJIA decline of 2997 points could be called “Black Monday” as that decline was the second worst compared to “Black Monday” on October 19, 1987.  Still, the worst percentage loss of DJIA was on October 19, 1987 at 22.67% when it lost 508 points (the largest point loss at that time).

For the week and year-to-date, the devastation was widespread:

For the:               WEEK           2020 YTD          

NASDAQ           -12.64%           – 23.33%    

DJIA                   -17.30%           – 32.81%    

S&P 500              -14.98%          – 28.66%     

BDH Strategy        0%                  – 6.13%     

BDH Strategy Comes Through In Flying Colors  

The BDH strategy has lost only 6.13% year-to-date.  This is 17 to 26 percentage points less than the three major averages. Our strategy will always lose less in corrections and bear markets, since it has the technical tools to identify trend changes.  Getting out of the market before major damage has occurred is worth tens of thousands of dollars in value to investors.

The market has breached its long term trend lines from 2009 and 2011 on an intra-day basis as  the monthly chart of the S&P 500 below shows.  Note that I placed two support lines on the chart below of the monthly S&P 500 Index at 2352 and 2131, respectively.  The MACD on this monthly chart has issued a sell signal so the future price movement is tilted to the downside until such a time as the market stabilizes and moves higher.

Market Internals Reach Extreme Levels Seen at Market Bottoms

The percentage of the NYSE stocks above their 200-dma collapsed to 4.16% from 7.38% the prior week.  This was its lowest reading since October 2008 when it registered 2.25%.  More importantly, the percentage of NYSE stocks above their 50-dmas also fell precipitously to 3.44% to 4.48% the prior week (see chart below).  This compares to an October 2008 reading of 1.25%.  Usually all readings below 15% on both these indicators resulted in significant rallies within a few days of reversing off these low levels. The question is when and if a rally occurs imminently or takes more time to develop because of the unknown timetable of the coronavirus pandemic in the U.S.  The  chart below shows the NYSE Bullish Percentage of NYSE Percent of Stocks Above 50 Day Moving Average chart so you see the dramatic deterioration.

Likewise, the number of new 52-week NYSE new highs fell to 23 from 309 the prior week, a further deterioration. Moreover, the number of new NYSE 52-week lows fell precipitously to  2,714 compared to 2,536 the prior week showing the market’s complete collapse and pervasive decline.  For the week, GLD (Gold) fell 2.21% after falling 9.06% the prior week. GDX (gold miners)rebounded 8.16% after falling 35.4% a week earlier. USO also got killed gain 29.02% after collapsing 20.3% the week earlier. Even TLT, a 20-year treasury bond that usually goes in the opposite direction of stock prices during market panics did so this week with a gain of 3.57% after diving7.59% the week earlier. 

BDH DASHBOARD – “1” SELL Signal  No Change

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator  gave a SELL signal Thursday, February 27.  Its last BUY signal was on October 14, 2019.  Refer to $comp chart below.

Indicator #5 NASDAQ Composite with MACD.  This indicator had a SELL signal on February 21, 2020 on the slow MACD. (See first chart below).

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest March 11, 2020 Bullish Percentage reading was 34.4% up from  29.7% the previous week.  I was surprised that this percentage rose this week when there was so much negativity in the markets. Nevertheless it is still on its long-term buy signal.

Indicator #8 NASI Summation Index and MACD.  This indicator issued a SELL signal on Tuesday, February 25, 2020.  Refer to $NASI chart below.

BDH Decision Page – BDH Dashboard ETFs 

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

On ETFscreen.com, the Decision Page indicated that only 1 ETFs (TLT) out of 46 has “pass” ratings which was the second week in a row of this occurrence, showing massive internal market price deterioration.

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 week by hitting the down carat you will note that the best performing ETFs in our 46 ETF universe last week were TLT, TBT, BOND,SKYY CLOU and CIBR with only TLT in the green with a gain of 3.57%.

Dark   Liquidity

The link is as follows:

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

The BDH strategy is now ranked 6th down from 14th the prior week.   The dark-liquidity table shows the current portfolio at 100% cash. 

Top 5 ETFs –100% Cash

The portfolio is now 100% in cash and will remain there pending a new BUY signal on the BDH Dashboard.

Game Plan Going Forward – Potential Extreme Danger Ahead

Currently, we are in a bear market (defined as a decline of 20% or more) until further notice.

The current trend has changed to downside  based on a short-term chart, and just holding above support on a 15-20 year monthly chart. The market is excessively oversold and most market internal indicators are at their lowest readings in years, as previously covered.  This is where market reversals tend to occur, but there are no guarantees that the market won’t work its way lower, even if it rallies for a few days.  There are too many unknowns going forward.

It is possible that the lows of this correction occurred this past Friday March 20, but I’ve said the same thing for the past three weeks without any indication that the market has reversed direction yet. Unfortunately, we won’t know if that is the case until after the market moves higher.  Also, note that the market usually moves up at least 5 -7% before our Dashboard will trigger a BUY signal.  Note the faster MACD indicator (lower one) on the  $COMPQ chart above is trying to turn up which is a good sign.  Also on the above $NASI chart the faster MACD highlighted by the orange circle is nearing an upward crossover.

Very aggressive investors may want to take advantage of this correction, as mentioned in my interim blog post on March 12 to subscribers, but waiting for the NASDAQ Composite to exceed its 200-dma at 8411.63 is not a good strategy, as it is 22% away from its 6879 closing price.  Therefore, consider the MACD fast crossover on Indicator # 5 and #8 as your first indication of a potential change in market direction.  However, this is still a very dangerous situation and the market may bounce for a few days and then crack again to the downside.

If you decide to enter here make sure to use appropriate personal stop LIMIT orders to protect your principal if the market suddenly reverses.

Conservative investors – 99.9% — should remain in cash with and await the next BDH BUY signal, as this market is very treacherous and can end up much lower as the corona virus spreads exponentially around the globe, and especially in the U.S.

I will be sending out a separate email later this afternoon about the April 1, 2020 to March 31, 2021 yearly subscription renewal situation.  The payments coming in so far are few in number, so I will assess the situation and provide input on the possible outcome.

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 may not available during the week to provide interim Dashboard signal changes. It is important to be pro-active, so as not to miss any Dashboard signals. Decide on and place your stop LIMITS, if you use them, 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.”

Leave a Reply

Close Menu