Taking Stock - Week of April 12, 2021

Monday, April 12, 2021

Yellow Arrow Sideways

DJI30 Index at the close   —-    33,745.40   -55.20 (-0.16%)

The index opened at 33775, off 26 points.  After a brief rise to 33786, off 14, it fell, hitting 33691, off 110 after 11:00.  By noon it recovered to 33770.  After 12:45 it fell again, hitting the day’s lo of 33666, off 135, after 2:00.  It stayed under 33700 until 3:30, when it was sharply rising, reaching the hi of 33786, off 14, 8 minutes before the close.

This was an inside day: minus 25 points at the hi end and plus 139 at the lo.  The span was an extraordinarily narrow 121 points, the least since 83 points on 1/17/2020 - well before last year’s crash.  If there is a positive here, it is in the day’s lo moving higher, which justifies the yellow arrow.

Last Friday there were new intra-day and closing highs.  Today was pretty uneventful. All the indexes were down a bit, and except for the SP500 which briefly went slightly positive in the early afternoon, they were all in the red all day.  DJI volume has been on the light side all month, and NYSE volume has been about 70% of normal.

It looks as if the DJI and SP500 are in third waves up from the 3/23/20 bottom, at some level of trend.  If that is right, then consolidations and brief corrections can safely be ignored, and there is still a long way to go up.  If!  The problem is the weak volume.  This does not look bullish, so the signals are mixed.

I read an article recently that graphical showed that not only is the stock market disconnected from the underlying economy, it has NEVER been connected.  I’ve repeatedly said that the market is an aspect of human emotion, and the collective behaviors of investors and speculators are, at best, semi-rational.  This is why we see extreme over and under valuations, and the occasional violent jolt.

% Changes -

DJI30  -0.16% 

SP500 -0.02%   

NASDAQ  -0.36%    

Russell 2000 -0.43% 

DJI30 Closings -

04/12/19 - 26412

04/09/20 - 23719

03/12/21 - 32779

04/12/21 - 33745

NYSE Internals - 

A/D =  1640/1644 = 1.00  <---  how rare is this?!?

A/D Vol = 0.81

New Hi/Lo = 305/17 = 17.94

Tuesday, April 13, 2021

Orange Arrow Sideways/Down

DJI30 Index at the close   —-   33,677.27   -68.13 (-0.20%)

The Index opened at 33721, off 24 points, and quickly fell to 33546, off 200.  It rose to 33660, off 85, at 11:30, then fell again to near the lo at 1:00.  From there it rose again, reaching 33700 by 3:00, on the way to 33742, the day’s hi, a few minutes later, followed by a 64 points slide into the close.

At the hi, the Index missed positive territory by less than 4 points.  The Russell did pretty much the same thing, and wound up negative by a similar percentage.  The SP500 started slightly negative, then went positive for the rest of the day. The NASDAQ  was totally green, and the day’s percentage leader.

Even with only a small loss, this is a clearly down day for the DJI, with the hi and lo lower by 45 and 120 points, respectively.

The SP500, on the other hand reached new all time intra-day and closing highs - for the 5th time in the last 9 sessions.  Yesterday, it made an all time intra-day hi and missed at the closing by less than a point.  It’s biggest pull-back this year was 5.75% from the 2/26 hi to the 3/04 lo. The climb so far this month has been steep. But the volume today is exactly half of what it was on April 7.  DJI volume was also less than normal, but not so dramatically.   NYSE volume was 70% of what is has been for  the previous 34 sessions.  

Here are some more sobering observations.  

% Changes -

DJI30  -0.20% 

SP500 +0.33%   

NASDAQ  +1.05%    

Russell 2000 -0.22% 

DJI30 Closings -

04/12/19 - 26412

04/13/20 - 23391

03/12/21 - 32779

04/13/21 - 33677

NYSE Internals - 

A/D =  1608/1701 = 0.95 

A/D Vol = 0.88

New Hi/Lo = 293/16 = 14.94

Wednesday, April 14, 2021

Greenish-yellow Arrow Sideways

DJI30 Index at the close   —-   33,732.14   +54.87 (+0.16%)

The index opened at 33669, the day’s lo, off 8 points.  It rose quickly, reaching 33870, up 193, at 10:00, and 33911, the day’s hi, up 234 after 11:00.  But after noon it fell, hitting 33750 after 2:00 and 33715 at 3:00. Then there was a bump to 33780 at 3:30, and a slide into the close.

The afternoon was poor, leading to a mediocre finish.  But the morning gave us a new intra-day hi, and this was still a clearly up day, with the hi and lo higher by 170 and 123 points, respectively. The close missed a new hi by 68 points.

This month, DJI volume has averaged 79% of the mean value for the past year. NYSE volume today was 76% of its 34 day average.  Friday is the 3rd Friday of the month, when options expire, so we can expect higher volume and volatility on that day.

The indexes had relatively similar contours today, with the SP500 and NASDAQ landing in the red, and the Russell gaining the most - though it still looks like it might be forming a head and shoulders pattern.  

% Changes -

DJI30  +0.16% 

SP500 -0.41%   

NASDAQ  -.99%    

Russell 2000 +0.84% 

DJI30 Closings -

04/12/19 - 26412

04/14/20 - 23950

03/12/21 - 32779

04/14/21 - 33732

NYSE Internals - 

A/D =  1921/1359 = 1.41 

A/D Vol = 1.96

New Hi/Lo = 292/19 = 15.36

Thursday, April 15, 2021

Green Arrow Up

DJI30 Index at the close    —-   34,035.99   +305.10 (+0.90%)

The index opened at 33789, up 56 points and immediately rose to 33960, up 227.  It went sideways for an hour, then jumped up to 34018, up 286. It topped out at 34035, hitting that level twice between 12:00 and 1:00.  It stayed above 33975 the rest of the day, and hit the day’s final hi of 34069, 15 minutes before the close.

This is a clearly up day, with the hi and lo up by 158 and 120 points, respectively.  The span was 280.  This gives us new intra-day and closing highs.  The SP500 did likewise.  The Russell has been hovering between 4 and 6 percent below its hi, since a week after it was reached on 3/15.  The 5 and 34 day EMAs have been essentially identical since the beginning of the month, indicating that price gains have stalled.

The NASDAQ reached its closing hi on 2/12.  It dropped 10.5% to an intermediate lo on 3/08, and has been rising since hitting a higher lo, 8% off, on 3/24.  Today it closed less than a half percent under that high.  So there are broad non-conformations among these indexes, which is not encouraging. 


I got an email today from wealthyretirement.com listing these warning signs.


1. Dollar inflows to equity funds in the last 5 months, totaling $569 billion, are much greater than the $452 billion total contributed in the previous 12 years.  This is astounding, and as a contrarian indicator is nothing short of terrifying.

2. Markets are expensive by any measure: valuations against sales, earnings, cash flow or book value.  There is also the Buffet indicator, relating the total valuation of a stock market to the size of the underlying economy, as measured by GDP.  This is at an all time hi.  Here is a graph.

3. There is now an ETF actually named "Fear of Missing Out" with the symbol FOMO (not yet registered - link.)  Its goal is to own whatever is hot the current week [!]: SPACs, Reddit stocks, space exploration stocks, and anything else that is gaining fast. 


FWIW, DJI volume is about 80% of what it has been for the previous year.  NYSE volume is 76% of it 34 day average.  This shows weak enthusiasm for the rally.

Markets can be over-valued, even extremely so, for long periods of uncertain duration.  There won’t be a crash tomorrow, or even this month.  But there could be a significant pull-back later this year.  

Fasten your seat belts and hang on to your hats.  I suspect a lost decade is coming.  

We just don’t know when.

% Changes -

DJI30  +0.90% 

SP500 +1.11%   

NASDAQ  +1.31%    

Russell 2000 +0.42% 

DJI30 Closings -

04/12/19 - 26412

04/14/20 - 23950

03/12/21 - 32779

04/14/21 - 33732

NYSE Internals - 

A/D =  2081/1202 = 1.73 

A/D Vol = 1.33

New Hi/Lo = 318/25 = 12.72

Friday, April 16, 2021

Green Arrow Up

DJI30 Index at the Close   —-   34,200.67   +164.68 (+0.48%)

The Index opened at 34058, the day’s lo, up 22 points, and quickly jumped to the day’s hi, 34257, up 221. From there it slumped, hitting a local low of 34112, up 76, at 1:00.  It then climbed, reaching the hi again at 3:40, followed by a 57 point slump into the close.

This is another clearly up day, with the hi and lo higher by 188 and 270 points, respectively. The spread was 199.  Again, there were new all-time intra-day and closing highs by 188 and 165 points, respectively.  The gain for the week was 1.18%.  Options expired today, and DJI volume was up a bit at 87.5% of its 1 yr avg, compared to yesterday’s 80.8%.  NYSE volume was up also at 105% of its 34 day avg.

The SP500 also reached new all time intra-day and closing highs.  The NASDAQ was in the red much of the day, but at the end crept closer to a new closing hi, missing by 0.31%. The Russell 2000 was also in and out of the red, and finished marginally higher, but still more than 4% under its all time hi.  It still might be forming a bearish head and shoulders pattern.

 

Investor’s Business Daily reported this.

“The economy now appears to be firing on all cylinders, delivering upside surprises to retail sales, jobless claims and factory activity. Retail sales surged 9.8% from a year ago, with stimulus checks adding fuel to vaccine-enabled reopening. Sales at food and drinking places jumped 13.4%, while clothing store sales leapt 18.3%. Online and other nonstore sales were among the few categories that didn't grow in double digits, rising 6%. Jobless claims, which fell 193,000 to a pandemic-low 576,000, finally reflect the higher gear for the labor market apparent in March's 916,000 job gain. Meanwhile, regional factory activity readings in the New York and Philadelphia Fed districts came in hotter than expected, with the latter holding close to March's 50-year high.”

Yes, the economy is improving, and that is contributing to animal spirits - for now. But remember, the stock market is NOT the economy.   Regarding those hi percentage changes year over year, remember that in April last year the general economy was still deeply depressed due to CV-19, so remember that old devil denominator, and take them with a pound or two of salt.

% Changes -

DJI30  +0.48% 

SP500 +0.36%   

NASDAQ  +0.10%    

Russell 2000 +0.25% 

DJI30 Closings -

04/12/19 - 26412

04/14/20 - 23950

03/12/21 - 32779

04/14/21 - 33732

NYSE Internals - 

A/D =  1884/1443 = 1.31 

A/D Vol = 2.34

New Hi/Lo = 433/21 = 20.62