May 30, 2020 Market Powers Higher

NASDAQ 9489.87 +1.77%for the week

Market Continues Its Powerful Rally since March 23 low

Market Performance

This was the 6th week out of the last ten that the NASDAQ Composite has advanced.  Over the course of this two-month rally, there four weeks when this Index jumped between 510 and 900 points, an astonishing rise over the course of a short time.  Currently, this Index is leading the market higher and has surpassed all of its key moving averages – 50-, 100-, and 200dmas.  The S&P 500 only managed to surpass its 200-dma this past week. 

Clearly, the FAANG stocks have led the NASDAQ and S&P 500 higher while many stocks have languished not doing so well. These stocks make up 20% of the NASDAQ index so they have an oversized impact on its performance.  According to Barron’s (June 1, 2020, page 9), the S&P 500 had its best two-month back-to-back period since April 2009 with a gain of 17.79%, and a gain of 36.06% from the March 23, 2020 low.

For the week and year-to-date, the market has recovered from -30% levels on March 23, as you can see in the data below with the NASDAQ now positive for the year:

For the:               WEEK           2020 YTD          

NASDAQ           +1.77%             +5.76%    

DJIA                   +3.75%             -11.06%    

S&P 500             + 3.01%             – 5.77%     

BDH Strategy        N.A.                – 2.09%     

Market Internals

The percentage of NYSE stocks above their respective 200-dmas stands at 27.60%, still quite a low level compared to the market comeback so far.  This low percentage clearly indicates that many stocks are far away from this moving average when compared 74% at the market high on February 23, 2020,

On the other hand, the percentage of NYSE stocks above their respective 50-dmas has skyrocketed to close the week 89.09% after hitting a high of 91% earlier in the week.  This extremely high percentage is a very rare occurrence which occurs when the market gets over extended on the upside.  This does not necessarily mean the market can’t continue to advance, but the magnitude of the advance may be slowed going forward.  As you can see in the chart below, we are at rarified levels with little room to go higher.  As mentioned in my March 23 blog post the extreme low reading of 3% on March 23 was also an indication of a market low.

the number of new 52-week NYSE new highs registered 82 last week from 90 the prior week, a very weak performance considering the advance from the lows. However, the number of new NYSE 52-week lows registered 23 last week compared to 2,714 in the week ending march 21.  

BDH DASHBOARD – “4” BUY Maximum BUY Level

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator gave an unusual six buy and sell signals between February 27and May 2.  Its last BUY signal was on May 2, 2020.  The number of signals during that massive decline and recovery indicated the high volatility during that period. Refer to $comp chart above. 

Indicator #5 NASDAQ Composite with MACD.  This indicator had a BUY signal on February 26, 2020, a SELL signal of May 14 and another BUY signal on May 19 on the slow MACD. Refer to $comp chart above. 

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest May 27, 2020 Bullish Percentage reading was 33.1% up 4.4 percentage points the previous week.  This indicator is still on its long-term buy signal, and in the past 6 weeks fell below 25% and rose above it to give another confirming BUY signal.

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

BDH Decision Page – BDH Dashboard ETFs 

Compared to the March 21 ETFscreen.com, where the Decision Page indicated that 45 out of out of 46 had a “fail” rating, this past week 43 ETFs had a “pass” rating showing the market’s incredible recovery and current strength.  The Top 5 on the BDH Decision Page are ARKK, ARKW, CLOU, TAN, and FDN.

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 BRF, XAR, XLRE, XLU and CIBR.  The last 1 month the top 5 were: CLOU, XWEB, ARKW, SKYY and XHB.

The link to the BDH Decision Page: https://www.etfscreen.com/buydonthold/bdh-decision-page.php

Dark- Liquidity.com

The BDH strategy is now ranked  10th.   The dark-liquidity BDH table shows the current portfolio of HACK, ARKW, TLT, XLV and XMI with a 10% position each and 50% cash.  By being in cash for the last few weeks, we did not participate in the last price surge. The link is as follows:

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

Top 5 ETFs –50% Invested and 50% Cash

The portfolio is has suffered in the past three weeks being 50% in cash, as most of the positions, except for TLT (a defensive bond) which has underperformed. The question is what to do now, after the market’s big runup.  If we invest the remaining cash now with the market at overbought levels on many technical indicators, we may be entering just as the market is about to start a decline.  On the other hand, there is no reason to assume that the market can’t go much higher from here and exceed the February 23 highs, especially the NASDAQ Composite.

My recommendation is to invest the remaining 50% if the NASDAQ is able to exceed 9600 on a closing basis taking out the filled gap area and exceeding the last closing price (see chart).

Closing above 9600 would indicate a potential to reach the all-time highs.

Game Plan Going Forward – Invest Remaining 50% Cash

This game plan is for paying subscribers only.

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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