May 2, 2020 – Market Takes a Breather

NASDAQ 8604.95  -0.34% for the week

Market Performance

April 2020 was the best month for the S&P 500 gaining 12.7%,the largest increase since January 1987.  Moreover, the NASDAQ Composite advanced an astonishing 15.5%, the best performance since June 2000,  both  data points  coming from the Stock Trader’s Almanac 2020 edition.

Don’t forget that March was one of the worst months in decades for the major averages, and we still have not made up the loss for March. After huge weekly gains the week of April 5 and 13th, the market has fallen minimally the last two weeks, with big down days on April 21, 28, and May 1. This Friday’s market rout eliminated all the gains for past week in one fell swoop.

For the:               WEEK           2020 YTD          

NASDAQ            -0.34%       – 4.10%    

DJIA                    -0.22%       – 16.87%    

S&P 500              -0.21%       – 12.38%     

BDH Strategy      -0.11%       –   6.16%     

The above chart shows that the NASDAQ Composite breached the  200-dma to the upside on April 22 and then six days later on April 27 vaulted above the critical 100-dma  (Indicator#2), only to fall below the 100-dma on Friday, after going back and forth above and below this line on April 28, 20 and May 1.  Right now the NASDAQ is sandwiched between the 100- and 200-dmas.  Which direction it goes from here is anyone’s guess.

Note the lower faster MACD is about to make a negative crossover.  If that occurs, then the BDH Dashboard will be on “2” Neutral signal.  Right now as the attached Dashboard show, we are still on a BUY signal which has been the case since March 26, 2020.

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

The percentage of the NYSE stocks above their 200-dma  settled at 14.16% down from 28% earlier last week, and up from 4.25% at the March lows. This low percentage still has a long way to go to reach the lofty level of 74% in January 2020.  More importantly, the percentage of NYSE stocks above their 50-dmas also settled at 44.5% at week’s end after rising to 63% two weeks ago and up from 3.00% at the March lows.

On a positive note, the number of new 52-week NYSE new lows shrunk  to 25 from 284 in early April from 2,714 and  2,536 during the worst  two week periods.  This is a very positive trend reversal.

For the week, GLD (Gold) declined 1.76% after reaching a yearly high the week earlier.  GDX (gold miners) declined 1.89% after reaching its yearly highs the prior week. USO got crushed again dropping 8.3% closing at the lows for the year.  USO has declined from $91 on February 18 to $18.86  on Friday.   TLT, a 20-year treasury bond, fell 1.56% remaining in 5-week tight trading range.  

BDH DASHBOARD – “3” BUY  Signal Remains in Place

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator  gave its last SELL on Friday, May 1, 2020.  Its last  BUY signal was on April 29, 2020.  Refer to $comp chart above. 

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 29, 2020 Bullish Percentage reading was 30.6% up 1.3 percentage points from the previous week’s reading of 24.9%.  This indicator just flashed another confirming BUY signal, as it rebounded from below the 25% trigger level the prior week. This indicator is still on its long-term buy signal of December 7, 2018, and has never gone to a sell signal even with the latest massive sell-off in February and March 2020.

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 –10% Invested and 90% Cash

Our only current position is a  10% position in HACK.  TAN, XHB, SMH and ARKK were all sold at their stop LIMITs at 5% each. Unfortunately, I had placed the stops to tight and was knocked out of the market before they all rebounded in April.  That cost about 10 percentage points of gain.  Stop management is a difficult process since you don’t want to give up too much of your gains, but you also want to protect your principal if the market collapses.

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 43 1 ETFs  out of 46 has a “pass” ratings.  That shows the strength in the market rebound. Interestingly, TLT was the best 1-month and 3-month performer of all the 46 ETFs in our universe.  The Top 5 ETFs in the table are ARKW, TLT, ARKK, XBI and CLOU.

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 XHB, BRF,XOP, XLE and XRT all up 3.24% or more.  The five best over the past month were: XOP, ARKK, XWEB, XLE and XHB all up over 29%.

Dark   Liquidity

The link is as follows:

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

The BDH strategy is now ranked 10th a drop of 3 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 –Unknown Direction

Currently, we are still in an unstable market with decking but high volatility, below the extreme levels of April 6 and 13. The market bottom may have occurred on March 23 or may be tested in the months ahead, as was the case in the 1987 and 2008-2009 market debacles.  One factor to consider before putting any additional capital at risk is that the May through October period is considered the weakest 6 months of the year where the market tends to decline in most years.

Normally, with a BUY on the BDH Dashboard, we would be fully invested in the market, but we have recently sold out positions, so we are in a tough spot now.  Certainly, at the minimum Indicator #2 needs to surpass and stay above its 100-dma so we have a maximum “4” buy signal.  Moreover, if the NASDAQ declines from here and falls below the 200-dma that would indicate a negative situation and no further consideration of making purchases.

This paragraph only provided to subscribers with the recommendation on entering the market.

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.”

Leave a Reply

Close Menu