Friday, March 24, 2017

Durable Goods Orders … Stock Market Trading Alert … Stock Market Analysis … Trading ETFs and ETF Ranking

DURABLE GOODS ORDERS (Bloomberg)
Let’s get the February numbers; yesterday I posted January numbers…
“Orders for U.S. durable goods increased more than forecast in February, a sign companies are confident about the outlook for the economy. Bookings for goods meant to last at least three years rose 1.7 percent….” Story at… 
 
STOCK TRADING ALERT (Safehaven)
“…the broad stock market retraced some of its Tuesday's decline yesterday, as the S&P 500 index gained 0.2%. Is this just a quick rebound before another leg down or upward reversal? There have been no confirmed short-term positive signals so far. We still can see medium-term overbought conditions along with negative technical divergences. Therefore, we continue to maintain our speculative short position.” Paul Rejczak. Commentary at… 
 
MARKET REPORT / ANALYSIS        
-Friday the S&P 500 was down about 0.1% to 2344.
-VIX slipped about 1% to 12.96.
-The yield on the 10-year Treasury was down slightly to 2.413%.
 
Friday we saw the second test of the recent low of 2344 and today’s test was at the close and that’s a better signal. The Index dropped to the 50-dMA and bounced up. Volume fell even further and we note that smaller stocks have been outperforming the S&P 500 recently (and again today). 52.9% of stocks on the NYSE have been up over the last 10-days. All those are bullish indications.  The market is getting better behind the scenes. This could be a fake out; in a mini-correction the signals are highly suspect, but if I saw these numbers after a 20% drop, I’d be all in.
 
The reason is that this suggests selling is drying up and it looks like the most likely move is up. It’s doing this in the face of very high sentiment. Does it make sense? Not really; one would think the markets need to correct further (and they may), but the numbers hint otherwise.
 
In response to the improvements I moved back in at a 50% in stock position in long-term accounts and pared my short positions slightly. (I had too much going on to post the move ahead of time.) As I wrote yesterday, I don’t know that the market can breakout significantly above the old highs, but it might try.
 
CURRENT RANKING OF 15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.  While momentum isn’t stock performance per se, momentum is closely related to stock performance. For example, over the 4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see NTSM Page at…
I would avoid iEAFE (Europe and Far East) & XLE; currently their 120-dMAs are declining.    
 
The Financials remain number one, but they are losing momentum and may have topped out. Interest rates are slipping some and that is bad for the Financials.
 
Recommended ETF Portfolio of top 3:
1. Financial Select Sector SPDR (XLF)
2. iShares U.S. Aerospace & Defense (ITA)
3. Technology Select Sector SPDR ETF (XLK)
I have not yet established a position based on the ETF Ranking; I am waiting for a better entry point.
 
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Rydex 2x Short S&P 500 (RYTPX): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
Long Volatility ETN (VXX): Established 6 Jan 2017.  
NET:
Now I wish I had tightened trading rules sooner. I am underwater again!
-“In a bull market, you can only be long or neutral.” – D. Gartman
-“The best policy is to avoid shorting unless a major bear market is underway and downside momentum has been thoroughly established. Even then, your timing must sometimes be perfect. In a bull market the trend is truly your friend, and trading against the grain is usually a fool's errand.” – Clif Droke.
 “There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
 
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals turned Neutral on the market.
Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting). 
 
LONG TERM INDICATOR
Friday, Sentiment was negative (Bullishness is at an extreme.); Price was positive; Volume & VIX indicators were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 24 March 2017 in my long-term accounts. Remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation based mostly on low volume at the test of the recent bottom.

Thursday, March 23, 2017

Unemployment Claims … Home Sales … Durable Orders … Stock Market Analysis … Trading ETFs and ETF Ranking

UNEMPLOYMENT CLAIMS (Marketwatch)
“The number of Americans who applied for unemployment benefits last week jumped by 15,000 to 258,000 and matched a two-month high, with fresh revisions showing layoffs a bit higher in the past 15 months than previously reported.” Story at…
 
HOME SALES (Bloomberg)
“Purchases of new homes increased in February to a seven-month high, indicating the effects of the recent rise in borrowing costs on the U.S. residential real estate market have been modest. Sales rose 6.1 percent to a 592,000 annualized pace…” Story at…
 
DURABLE ORDERS (Bloomberg)
“Orders for U.S. durable goods rebounded in January, a sign companies remained upbeat at the start of the year. Bookings for goods meant to last at least three years rose 1.8 percent after a 0.8 percent decrease in December…” Story at…
 
CASS FREIGHT INDEX (CASS Information Systems)
“Both the Shipments and Expenditures Indexes have been positive for two months in a row. Throughout the U.S. economy, there is a growing number of data points suggesting that the economy is getting better. Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong.”  Press release at…
My cmt: The release said that year-over-year the February Cass Shipments Index is up 1.9% and the Expenditures Index is up 3.2%.  
 
MARKET REPORT / ANALYSIS        
-Thursday the S&P 500 was down about 0.1% to 2346.
-VIX rose about 2% to 13.12.
-The yield on the 10-year Treasury rose to 2.417%.
 
On the BEAR side: Money Trend remains down. My sum of 16-indicators went from -6 yesterday to 0 today – that’s an improvement, but longer term the sum of indicators is still down slightly. The Cyclical Industrial stocks (XLI) are underperforming the S&P 500.  There was late-day selling today…youuuuge late day selling – that’s bearish.
 
On the BULL Side: The 10-dMA of %-stocks advancing climbed to 54.4%. (A number above 50% is bullish.) New-highs outpaced new-lows today.
 
Bottom line: Numbers are improving and volume was low today as the Index tested the prior low around 2344. Indicators are mixed; still, it looks like selling may be ending.  If the Index is falling, but selling is drying up we need to be more optimistic. Let’s see what happens tomorrow. I don’t know that the market can breakout significantly above the old highs, but it might try.
 
CURRENT RANKING OF 15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.  While momentum isn’t stock performance per se, momentum is closely related to stock performance. For example, over the 4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see NTSM Page at…
I would avoid iEAFE (Europe and Far East) & XLE; currently their 120-dMAs are declining.     
The Financials remain number one, but they are losing momentum and may have topped out. Interest rates are slipping some and that is bad for the Financials. If this correction really gets going XLF will not do well while XLU will be the big winner, at least until the bottom of the correction. XLF should recover after a pullback.
 
Recommended ETF Portfolio of top 3:
1. Financial Select Sector SPDR (XLF)
2. iShares U.S. Aerospace & Defense (ITA)
3. Technology Select Sector SPDR ETF (XLK)
I have not yet established a position based on the ETF Ranking; I am waiting for a better entry point.
 
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Rydex 2x Short S&P 500 (RYTPX): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
Long Volatility ETN (VXX): Established 6 Jan 2017.  
NET:
Now I wish I had tightened trading rules sooner. I am underwater again!
-“In a bull market, you can only be long or neutral.” – D. Gartman
-“The best policy is to avoid shorting unless a major bear market is underway and downside momentum has been thoroughly established. Even then, your timing must sometimes be perfect. In a bull market the trend is truly your friend, and trading against the grain is usually a fool's errand.” – Clif Droke.
 “There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
 
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals are Positive on the market.
Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting). 
 
LONG TERM INDICATOR
Thursday, Sentiment was negative (Bullishness is at an extreme.); Price, Volume & VIX indicators were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I reduced stock allocation to 25% stocks in the S&P 500 Index fund (C-Fund) Wednesday, 1 March 2017 in my long-term accounts. Remainder is 75% G-Fund (Government securities). This is a conservative retiree allocation based mostly on short-term signals.