Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Monday, November 30, 2020

Taking Stock - Week of November 30, 2020

Monday, November 30, 2020

Red Arrow Down

DJI30 Index at the close   —-   29,638.64   -271.73 (-0.91%)

The Index opened at 29855, off 56 points, then dropped to 29630 in the first 6 minutes. After a bounce near 29700, it resumed falling, hitting a lo of 29476, off 435, at 10:45.  There was another bounce to 29600 before a drop to the day’s lo of 29464 after 11:30.  From there it was a jerky rise to the close, including a jump of 70 points in the last 2 minutes.


All the indexes were down today, with the Russell 2000 as the biggest loser. For what it’s worth, NYSE volume was the greatest since 9/18, and more than double what the average has been since.

This is a clearly down day, with the hi and lo off by 161 and 356 points, respectively. The span was 390.  Momentum is sideways,   Since 11/09 there have been 7 closings under 29500, so this is really going nowhere.  Today’s range is actually in the upper half of the trading range since that date, and the closing is 158 points above the the midpoint of that range.  It’s going to take a bigger fall than this to turn momentum downward.

I do expect that to happen, though, with an intermediate lo occurring around mid-December. This is speculative, of course.  Meanwhile, equities remain wildly over-valued by any historical or rational metric.  But the markets are fueled by emotion, not logic, so this can go on for a considerable time.

But the day of reckoning will come.  It always does.

% Changes -
DJI30 -0.91%
SP500 -0.46%
NASDAQ -0.06%
Russell 2000 -1.91%

DJI30 Closings -
11/30/18 - 25538
01/02/20 - 28869
10/30/20 - 26502
11/27/20 - 29639

NYSE Internals -
A/D = 958/2190 = 0.44
A/D Vol = 0.27
New Hi/Lo = 170/4 = 42.50

Tuesday, December 1, 2020

Monday, November 23, 2020

Taking Stock - Week of November 23, 2020

Monday, November 23, 2020

Green Arrow Up

DJI30 Index at the close   —-   29,591.79   +328.31 (+1.12)

The Index opened at 29333, up 69 points, and the lo for day; then rose to 29577 up 314. It dropped back to 29360 at 11:30, then rose slowly to 29540 at 2:30.  From there it thrust up to the day’s hi of 29668 at 3:08, 76 points above the close. 

This is a clearly up day, with the hi, lo and close up by 198, 102 and 328 points, respectively. The span was 335.  On Friday I said, “Resistance seems to be firming at 29500, and support somewhere above 29000."  This was half right.  Resistance, for now at least, is closer to 29700.

 Up 328 looks impressive, but the midpoint of the the last 2 weeks range is 29433, and today’s midpoint is at 29500, only 67 points higher.  So after a big surge up on 11/09, the Index has gone basically nowhere - or more precisely - down a little.  Short term momentum is now very slightly down; and over longer ranges, even beyond one month, appears to be topping.

For what it’s worth, Apple was down almost 3% today, closing at 113.85.   It was ridiculously overvalued when it peaked at 134.18 on 9/02.  For the last couple months it’s been trading mostly in the range of 110 to 120.  I believe it is still significantly overvalued.  I’ll get interested when it hits a low somewhere around 80.  Maybe in February.

% Changes -
DJI30 +1.12%
SP500 +0.56%
NASDAQ +0.22%
Russell 2000 +1.95%

DJI30 Closings -
11/19/18 - 25017
01/02/20 - 28869
10/23/20 - 28336
11/23/20 - 29592

NYSE Internals -
A/D = 2385/740 = 3.22
A/D Vol = 4.61
New Hi/Lo = 202/3 = 67.33

Tuesday, November 25, 2020

Monday, November 16, 2020

Taking Stock - Week of November 16, 2020

Monday, November 16, 2020

Green Arrow Up

DJI30 index at the close   —-   29,950.44   +470.63 (+1.60%)

The index opened at 29672, up 193 points, and quickly rose to about 29900.  After a brief draw back to 29730, it reached 29940 for about a half hour around 11:30.  It dropped to 29760 after 1:30 and stayed below 29860 until 3:30.  There was a rise of about 100 points in the last 4 minute of trading.

This gives us new all time highs, both intra-day and closing, only 14 points apart.  This was a clearly up day, with the hi, lo and close higher by 405, 468, and 470 points respectively - all this in the midst of a raging pandemic that will have unpredictable long-lasting effects.  Evidently this is due to the favorable vaccine news.  As if we didn’t already have a quarter of a million deaths, and more than another 1000 every day.  It will take months to get the vaccine approved and distributed among the population - if everyone hits all home runs.  Now we hear that people on their death beds in red parts of the country, are denying the virus, even as it takes their lives.  Such is the power of a monstrous predisent* and Fox news, who care nothing about the people of this country, spreading lies and killing people every single day.  And now I see that 40% of the population is planning on their normal Thanksgiving family get-togethers.  How many grandparent and grandchildren will we lose due to this carelessness and denial?  How many parents and front line workers?

These new vaccines need to be stored and transported at extremely low temperatures — minus 70 to 100 degrees.  Is your local CVS equipped with that kind of capability?  

Today’s action puts the Index only a fraction above where it was before the February crash, so maybe it wouldn’t be unreasonable - if the Index hadn’t been historically over valued back then, and we weren’t in the Covid world now.  The index has increased to a level more than 2 standard deviations above its 233 day EMA three times since early 2018.  Each time there was a draw back, of increasing severity.  It has just crossed above the 1 standard deviation line. On Feb 12 the Std Dev was only 1085.  Now, because of the steep decline and recovery, it’s 2379.  You can decide how over-extended this is.

The P/E ratio of the SP500 is now 36.55.  It’s been higher than that only twice — in 2001-2 and 2008-9.  Those were good times, weren’t they!   Going back to 1880, it had never gone above 25 and change until the late 90’s.  Even in this century, when it’s been above 20 most of the time, this is only the 3rd time.  Good luck going forward!

Yeah, I’m seriously in downer territory here.  But this is all so depressing. Yet stock Indexes reach new highs.  Yay, hooray!

% Changes -
DJI30 - 1.60%
SP500 + 1.16%
NASDAQ = + 0.80%
Russell 2000 +2.37%

DJI30 Closings -
11/09/18 - 25413
01/02/20 - 28869
10/16/20 - 28606
11/12/20 - 29950

NYSE Internals -
A/D = 2562/536 = 4.78
A/D Vol = 6.22
New Hi/Lo = 198/3 = 66.22

Tuesday, November 17, 2020

Monday, November 9, 2020

Taking Stock - Week of November 9, 2020

Disclaimer:  I am not a financial advisor, and do not give advice.  Make your own decisions.  Chose wisely.

Monday, November 9, 2020

Green Arrow UP a lot

DJI30 Index at the close   —-   29,157.97   +834.57 (+2.95%)

The Index opened at 29468, up an astounding 1145 points, or 4.04%, and quickly leaped further to 29934, an even more astounding 1610 points, or 5.69%, and a new all time intra-day hi.  It slid back to 29340 around 11:00, rose again to 29700 at 1:00 and hovered near there for an hour.  It slipped back to around 29500 at 3:30, then dropped hard in the last half hour, ending at 29158, about 27 points above the low.

This was a wild ride, and a huge gain, despite giving back about half of the morning’s advance in the afternoon. I certainly was not expecting this.  It’s a clearly up day, with the hi, lo and close massively higher by 1502, 941 and 835 points, respectively.   This gave us a new all time intra-day hi, but not a new hi at the close, which is about 40 points under the 9/03 hi.

I’ve been predicting a down-turn, and this is, obviously, not it.  Whether I’m wrong or not depends on what kind of follow-through happens in the next few days. Strangely, the NASDAQ’s participation in the morning’s surge was rather anemic.  It’s gain at the opening was 1.27%, which is respectable.  But it slid most of the day, and wound up 1.53% in the red.

Either this was the last gasp of irrational exuberance, or I’ll have to go back to the drawing board.  The big decline at the end of the day suggests that this might be a toss up.

% Changes - all the Indexes except the NASDAQ were up all day

DJI30 + 2.95% 

SP500 + 1.17&%   

NASDAQ - 1.53%    

Russell 2000 + 3.70%  [!]

DJI30 Closings -

11/09/18 - 25989

01/02/20 - 28869

10/09/20 - 28587

11/09/20 - 29158

NYSE Internals -

A/D = 2442/683 = 3.58

A/D Vol =  0.83 = 4.93

New Hi/Lo = 345/12 = 28.75

Tuesday, November 10, 2020

Monday, November 2, 2020

Taking Stock - Week of November 2, 2020

Disclaimer:  I am not a financial advisor nor stock market professional; nor am I in any way qualified to make recommendations.  I’m just an old man with curiosity, an attitude and an internet connection. I realized long ago that I see the world differently from most people, and l am looking at these things for my own amusement and amazement.  Maybe you will be amused, as well.

Monday November 2, 2020

Green Arrow Up

DJI30 Index at the close   —-   26,924.92   +423.32 (+1.60%

The index opened at 26691, up 190 points, and immediate shot up to 26851.  After a brief slide back to 26730, It hit the day’s hi of 27043, up 541 at about 10:20.  It dropped to 26830 before 11:30, rose to 26975 at 11:45, then slowly dropped to a minimum around 26700 around 2:00.  It rose again, topping at about 26960 at 3:30.  From there it was a drop to 26815, and a 110 point leap to the close in the last few minutes.

This is a clearly up day with the hi, lo, and close higher by 404, 548 and 423 points respectively.  The lo to hi spread was 352.  An increase of 423 points looks impressive - at first.  But in the context of a drop of almost 2300 points from the 10/23 hi it really isn’t. Further, the early day hi was up 542 points, but the next two local highs were lower.  This sequence looks to be counter-current, with the major thrust still down.

The rise today is no surprise.  Nothing moves in a straight line  I thought this might happen last Friday, and the 295 point surge in the last few minutes was the beginning of the rally that lasted into this morning.  The rest of today was lack-luster, but the counter-current move could continue into tomorrow, or even for several days.  There’s quite a bit of room for movement on the upside, without changing the basic bearish picture.

There might be robust resistance in the low 27000s.  And there looks to be a support range between 26000 and 26500.  This is a rather narrow range that will likely break soon, one way or the other.  My guess is that the wave down continues.

% Changes
DJI30 +1.6% Positive all day
SP500 +1.23% Positive all day
NASDAQ +0.42% Dipped into negative territory before rising into the close
Russell 2000 +1.96% Positive all day

DJI30 Closings -
11/02/18 - 25721
01/02/20 - 28869
10/02/20 - 27683
11/02/20 - 26925

NYSE Internals -
A/D = 2275/797 = 2.85
A/D Vol = 5.43
New Hi/Lo = 32/29 = 1.10

Tuesday, November 3, Election Day 2020

Sunday, November 1, 2020

A different look at Apple [APPL]

I have two semi-contrary ideas.  The first is that the market, on average, over some long run time span, renders a realistic estimate of a stock's true value.  Of course, that estimate, though realistic, might not be accurate.  And, as Keynes said - in the long run, we’re all dead.  The second is that in real time the market varies wildly in the accuracy of its estimates.  The idea that ties these two concepts together is that the market makes its worst value estimates at tops and bottoms.  A corollary is that the panics which follow extreme under or over valuations tend to drive the estimated value to the other extreme.

My other, related, idea is that markets are fueled by emotion, or, in Elliott wave terms, social mood.  I’m not quite ready to buy into the entire social mood paradigm of human behavior, but I do think it’s useful to consider in the context of asset pricing.

As an example, let’s look at Apple Inc. [APPL]  Now, I think Apple is a great company.  My wife and I own and use several of their products every day.  I am using one to write this essay.  You may well be reading this on an Apple device.  And their stock performance, for the most part, has been stellar for a long string of years.  But I think the stock has recently soared to an unsustainable level.  And I base this not on any kind of fundamental analysis, but on the price action of the stock itself.  Let’s have a look at its chart [Graph 1.]

Graph 1 - APPL Closing Values, 1/04/10 through 10/30/20

The red line estimates a best fit exponential curve through daily closing data from 2010 to now.  However, since the big decline in the spring of this year the stock price has deviated dramatically from that curve, going up in almost a straight line.  Reminds me of Icarus.

Another way to think about this is that on February 12, Apple stock peaked at 81.80.  Then, after the end of the world in March and the excessively exuberant recovery, it peaked at 134.18 on September 1.  So, speculators [at this point we can hardly call them investors] decided that Apple was worth 64% more on the first day of September than it had been just 6 1/2 months earlier.  This, not to put too fine a point on it, is nuts!

Whatever the rational valuation price for Apple might be, even in the bizarro world of 2020, at least one of these numbers has to be wildly wrong.  The average over/under of daily prices, as compared to that best fit exponential trend line is +11.1%.  So the price growth over that entire period has been on average, a bit above exponential.  On Feb 12, it was over trend by 11.6%.  At the low on March 23, it was under trend by 29%.  But at the September 1 high, it was 68% over trend.  My guess is that this was too good to be true, and now the stock price is indeed falling.

Yet another way to look at this is the stock price relative to Its own moving average.  Since the stock has trended up over time, it runs above its moving average more often than not.  But not all the time, and not by the same amount. As graph 2 shows, the price [blue line] seems to be pretty tightly contained in a envelope bordered by two Standard Deviations above [red line] and one Standard Deviation below [green line] the 233 day exponential moving average [not shown.]

Graph 2 - APPL closings in an Envelope of +2 and -1 Std Dev.

Graph 3 shows the difference in standard deviations units between the daily closing price and its 233 day exponential moving average [EMA,] with the Standard deviation computed over that same 233 day period.  The mean value of that difference since the beginning of 2010 has been 0.92 standard deviations above the EMA.  This is indicated with a red line on the graph.  The orange line is the 89 day EMA of that difference.  It seems to track the values fairly well.  The graph shows that whenever the difference gets above 2 units, the price is in a danger zone, and will likely revert towards the mean.  At the extreme, on the two previous occasion when it got above 3 units, there was a sharp reversal to a price more than 2 units below the EMA.  Similarly, when the price drops more than 2 units below the EMA, there is a reversal toward 2 units above the EMA  If this pattern plays out again, it suggests a coming low somewhere near 80, per Graph 2, about where it was in February, and a potential buying opportunity at that time.

Graph 3 APPL Daily closings difference from 233 EMA, in Std Dev Units

A Final thought, and no disrespect to Benjamin Graham and David Dodd, nor to Warren Buffet.  There is an idea that you’re not buying a stock, you’re buying a company.  That's Buffet’s approach, it’s worked very well for him, and that’s what you’re attempting to do with fundamental analysis.  But unless you have deep pockets and a time horizon of several decades, this is probably not why you are in the market.  If there had been equities markets in 10th Century B.C.  Israel, the Book of Ecclesiastes would have had a verse saying that there is a time to buy and a time to sell.  The time to buy is when all the excess has been wrung out of the market for a particular stock or stocks in general.  My hope is that the ideas I’ve presented here may be helpful in identifying those times.

Note: Daily closing values from Yahoo Finance; calculations and graphs by me using the Open Office spreadsheet program.

Disclaimer:  I do not own Apple stock, though I may at some time in the future.  Except for a couple managed funds, I am out of equities markets for now. There will be a time to buy.

More disclaimer: I am not a financial advisor nor stock market professional; nor am I in any way qualified to make recommendations.  I’m just an old man with curiosity, an attitude and an internet connection. I realized long ago that I see the world differently from most people, and l am looking at these things for my own amusement and amazement.  Maybe you will be amused, as well.

Note 2: I almost managed to avoid saying that Apple's success stems from their core competence.  Now I leave you with these thoughts: invest wisely, speculate cautiously, avoid crowds, wear a mask and wash your hands.