March 8, 2020 — The Market Tries to Stabilize

NASDAQ 8575.62 +8.25 or 0.10%for the week

BDH Remains on Dashboard on “1” SELL Signal

Market Performance

After having their worst week since 2008, the three major market averages were able to eke out a small potential gain, after a huge day ending rally beginning at 3:10PM on Friday.   The NASDAQ Composite went up 199 during that time, and the DJIA went up 600 point is those 50 minutes, quite an amazing ride.  A positive close in a rough week is always a good sign, but we will see if next has continued follow through to the upside or gives it all back or more.  Don’t forget that the DJIA has swings of about 1,000 or more every day last week, but in both directions as volatility was a record levels.

For the week, the NASDAQ Composite gained 0.10%. The S&P 500 advanced 0.61%, and the DJIA rose 1.79%. 

For the:                 2020 YTD       

NASDAQ             -4.42%    

DJIA                      -9.37%    

S&P 500               – 8.00%     

BDH Strategy       – 6.13%        

Thus far, the BDH strategy has lost less than the S&P 500 and DJIA. On Friday at the close ARKW was sold as it fell below its stop LIMIT of $62.20.  Therefore, the ETF portfolio is in a 100% cash position.

Market Internals Continue Their Downward Trend

Both the DJIA and S&P 500 broke through and closed below their respective 50-, 100- and 200-dmas this past week.  The NASDAQ was on pace to do the same thing, but a stunning late day rally resulted in the NASDAQ not only closing above it 200-dma, but also closing up 0.89 points, while the other averages were down for the day.

During the week, the NASDAQ Composite was able to rise and stay above its 200-dma made on Friday February 28.  That was a positive.  However, it crossed the 100-dma four times and ended up below it on Thursday, this Indicator #2 did not provide a new BUY signal.  The NASDAQ is only about 160 points higher than its 200-dma so if the market falls beginning the week that level would be breached which is a very negative sign potentially pointing to a much further decline.

Note that the S&P 500 and DJIA both closed below their respective 200-dmas last Friday.  Also, be aware that all three major averages closed Friday at their lowest price since the recent February 28 low point this year.  So we are in a precarious situation.  However, being 100% in cash is a safe place to be right now.

The percentage of the NYSE stocks above their 200-dma rose slightly to 29.73% from 25.36% the prior week.  More importantly, the percentage of NYSE stocks above their 50-dmas also increased to 13.6% from 9% the prior week.  Since 2005, all readings below 15% on the later parameter resulted in significant rallies and started to reverse. Interestingly, this latter indicator jumped from 9% to 22% after last Monday’s rally only to be reversed down later in the week.

Likewise, the number of new 52-week NYSE new highs fell to 99 from 160 the prior week, a further deterioration. However, the number of new NYSE 52-week lows fell significantly to 809 from 1,139 the prior week.  For the week, Gold jumped  6.18%,  gold miners shined rising 12.17% after falling 14.5% the week before. USO lost another 7.62% after its 15% fall the week earlier, and TLT jumped a monstrous 7.54% after rising 4.91% the week before to another all-time high.

BDH DASHBOARD – “1” SELL Signal  Remains

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 4, 2020 Bullish Percentage reading was 38.7% down from 30.4% the previous week, quite interesting in a market that was falling . 

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 3 ETFs out of 46 have “pass” ratings which is way down from 4 the prior 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, XLU, XLP, XLV and XLRE.

Dark   Liquidity

The link is as follows:

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

The BDH strategy is now ranked 14th down from 11th  by dark-liquidity.   The dark-liquidity table shows the current portfolio.  Note that ARKW was sold on Friday as it close below $62.20

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, the market is in correction mode with a monumental rapid waterfall declines on many days the past two weeks due to world events.  The trend  has changed to down.

The market is excessively oversold and most market internal indicators are at their lowest readings in years.  This is where market reversals tend to occur, but there are no guarantees that the market can’t work its way lower, even if it rallies for a few days.

It is possible that the lows of this correction occurred this on Friday, January 28, 2020. Unfortunately, we won’t know if that is the case until after it occurs.  Also note that the market usually moves up at least 5% before our Dashboard will trigger a BUY signal. 

Very aggressive investors my want to take advantage of this correction, but hey need to make sure the NASDAQ Composite stays above its 200-dma before deciding to re-enter the market, and only if Indicator #5 Fast MACD (lower one on the first chart) triggers a buy signal as well.  This is not the BDH strategy as we need to see a “3” signal, but that will take a while to develop.  Aggressive investors who enter the market early need to have appropriate stops in case the market reverses and declines much further.

Most investors – 99% — should remain in cash with closed out positions and await the next BDH BUY signal, as this market is very treacherous and can end up much lower if the corona virus spreads globally.

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.”

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