Friday, January 12, 2018

Consumer Price Index … Retail sales … Stock Market Analysis … ETF Trading … Dow 30 Ranking

CONSUMER PRICE INDEX (Reuters)
“Underlying U.S. consumer prices recorded their largest increase in 11 months in December on strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.” Story at… https://www.reuters.com/article/us-usa-economy/rising-rents-healthcare-costs-boost-underlying-u-s-inflation-idUSKBN1F11QD
 
RETAIL SALES (Dallas News)
“The final numbers are in, and the past holiday season was indeed one of the best since the last recession -- even if everyone didn't partake in the good fortune.Sales rose 5.5 percent to $691.9 billion during November and December…” Story at…
 
MARKET REPORT / ANALYSIS         
-Friday the S&P 500 was up about 0.7% to 2786.
-VIX was up about 3% to 10.16.
-The yield on the 10-year Treasury was little changed at 2.549%.
 
There are a number of extremes in the market now.
-The S&P 500 Index is outpacing Utilities by 20% over the previous 2-months. Perhaps it is due to the expectation that interest rates will rise along with market euphoria, but this number is nearly double what we have seen at any time in the last 5-years and is worrisome.
-RSI and Bollinger Bands are once again giving sell signals.  Bollinger Bands are set 2 standard deviations above the mean so it’s an indication that markets are stretched.
-The S&P 500 Index is 11.5% above its 200-dMA and that’s a sign of a stretched market too.
-The Index is also 5.2% above the 50-dMA. You need to go back almost 2-years to find a higher number. 
-Sentiment is high too, although it has dropped from its bearish high of 88% bulls last week down to 78% bulls yesterday.
 
In spite of the topping indicators the markets can still go higher. As a reminder, we have seen these topping indicators before without an immediate top – or in some cases only a drop of a couple percent.  That’s hardly a “Top”. We can conclude, the odds of a top soon are higher – but not certain by any means.
 
My sum of 17 Indicators slipped from +9 to +8 today. On a 10-day basis, values were higher. A “+” number means that most indicators are bullish. This isn’t an all-clear though; conditions always look good at a top.
 
I am bearish short-term; longer term I am a bull; but we are due for a correction in 2018 due to Presidential election cycle history.  I still wouldn’t short this market – there are too many buyers. We’ve gone straight up, and a surprising number of people think this market is going much higher.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I’m waiting for a better entry point before adding other positions.
Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained Positive on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication.
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, Price and Volume indicators were positive; Sentiment & VIX indicators were neutral. This adds up to a BUY indication, but at this point a BUY signal is meaningless.  The NTSM system is designed to issue BUY signals near a Bottom as conditions rapidly improve.  Now, it is just an indication that the market is doing well.  The NTSM long-term signal can sometimes signal BUY at the top if conditions are too good. The last actionable Buy signal was on 15 November 2016.
 
With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I remain FULLY INVESTED. I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.

Thursday, January 11, 2018

Producer Price Index (PPI) … Jobless Claims … Stock Market Analysis … ETF Trading … Dow 30 Ranking

PPI/JOBLESS CLAIMS (Reuters)
“U.S. producer prices fell for the first time in nearly 1-1/2 years in December amid declining costs for services, which could temper expectations that inflation will accelerate in 2018. Other data on Thursday showed initial claims for unemployment benefits increasing for the fourth straight week to more than a three-month high. That probably does not signal weakness in the labor market as the number of Americans receiving jobless benefits is at levels last seen in 1973.” Story at…
 
MARKET REPORT / ANALYSIS         
-Tuesday the S&P 500 was up about 0.7% to 2768.
-VIX was up about 0.6% to 9.88.
-The yield on the 10-year Treasury rose to 2.546%.
 
RSI and the Overbought/Oversold ratio are once again giving sell signals.  Bollinger Bands are so close to an overbought indication it might as well be a sell. The S&P 500 Index is 10.8% above its 200-dMA and that’s a sell too. The Index is also 4.7% above the 50-dMA. You need to go back 2-years to find a higher number.  These are topping indicators. All we can say is that we are close to a short-term top.  Unfortunately, we can only guess at the size of a pullback; 5-10% is probably a reasonable guess. As a reminder, we have seen these topping indicators before without a top. The odds of a top soon are higher – but not certain by any means.
 
Today was statistically significant. That just means that the price-volume move up exceeded statistical parameters that I track. The stats show that about 60% of the time a statistically significant move up will be followed by a down day the next day.
 
In spite of topping indicators, my sum of 17 Indicators improved from +5 to +9 today. On a 10-day basis, values are still slightly falling. A “+” number means that most indicators are bullish. This doesn’t mean much – conditions always look good at a top.
 
I am bearish short-term; longer term I am a bull; but we are due for a correction in 2018 due to Presidential election cycle history.  I still wouldn’t short this market – there are too many buyers. We’ve gone straight up, and a surprising number of people think this market is going much higher.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I’m waiting for a better entry point before adding other positions.
Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved to Positive on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication.)
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, Price and Volume indicators were positive; Sentiment & VIX indicators were neutral. This adds up o a BUY indication, but at this point a BUY signal is meaningless.  The NTSM system is designed to issue BUY signals near a Bottom as conditions improve.  Now, it is just an indication that the market is doing well.  The NTSM long-term signal can sometimes signal BUY at the top if conditions are too good. If market conditions were to reverse, that’s when we’ll see a Sell signal. The last actionable Buy signal was on 15 November 2016.
 
With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I remain FULLY INVESTED. I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.

Wednesday, January 10, 2018

Crude Inventories … Stock Market Analysis … ETF Trading … Dow 30 Ranking

CRUDE INVENTORIES (OilPrice.com)
“A day after API contributed to WTI’s reaching its highest price level since 2015 with an estimated 5-million-barrel draw in crude oil inventories, the EIA reinforced the bullish mood with its own draw, and a big one, of 7.4 million barrels for the last week of 2017.” Story at…
 
INTEL (CNBC)
(1)“Some of Intel's data center customers are exploring using microchips from its rivals to build new infrastructure after the discovery of security flaws affecting most chips” Story at…
Intel has said their chip flaw is shared by competitors and would have no material impact on their business – but apparently investors don’t agree. Interestingly, while AMD said their chips do not have the same flaws (others including Intel dispute this) here’s a story from Microsoft that says there are problems with AMD chips that haven’t been solved.
 
(2)“Microsoft said it had suspended patches to guard against Meltdown and Spectre security threats for computers running AMD chipsets.” Story at…
Overall, the big problem for Intel is that the issue will cause the biggest hit to the Intel server business where they have enjoyed a near monopoly. I was busy all day (out), but it’s time to sell.  My gut feeling is that Intel is at risk for another 10% loss…too much for me.
 
MARKET REPORT / ANALYSIS         
-Wednesday the S&P 500 was up about 0.2% to 2748.
-VIX was up about 3% to 9.52.
-The yield on the 10-year Treasury rose to 2.488%.
 
Only 2 of the ETFs that I track – Financials (XLF) and Nasdaq Biotech (IBB) – were up today. This doesn’t seem to be a healthy sign, but over the last 10-days, 70% of the ETFs have been up, so it is too early to get worked up.  Further, a number of signs that have been bearish have improved recently: Sentiment; Bollinger bands; and the RSI; Overbought/Oversold ratio are no longer giving sell signals.  This doesn’t mean we are out of the woods, but it may postpone a pullback.
 
My sum of 17 Indicators improved from +3 to +5 today. On a 10-day basis, values are still falling. A “+” number means that most indicators are bullish.
 
I am bearish short-term; longer term I am a bull, but I recommend caution with the Fed raising rates and shrinking its balance sheet. In addition, we are due for a correction in 2018 due to Presidential election cycle history.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I’m waiting for a better entry point before adding other positions.
Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained Neutral on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication.
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                                                        
Wednesday, Price indicator was positive; Sentiment was negative; Volume & VIX indicators were neutral.  With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
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) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.

Tuesday, January 9, 2018

Small Business Optimism … Job Openings (JOLTS) … Stock Market Analysis … ETF Trading … Dow 30 Ranking

SMALL BUSINESS OPTIMISM (Business Insider)
“Small-business confidence hit a record high in 2017, according to the National Federation of Independent Businesses…The index came in at 104.9 in December.” Story at…
 
JOLTS (Morningstar)
"The number of job openings in the U.S. fell to a six-month low of 5.88 million in November from 5.93 million in the prior month. The chief reason: Another late-in-the-year hiring surge.” Story at…
 
MARKET REPORT / ANALYSIS         
-Tuesday the S&P 500 was up about 0.2% to 2748.
-VIX was up about 3% to 9.52.
-The yield on the 10-year Treasury rose to 2.488%.
 
My sum of 17 Indicators slipped from +5 to +3 today. On a 10-day basis, values are falling. A “+” number means that most indicators are bullish.
 
A number of short-term Indicators have been pointing down for a while; to make matters worse, today was the first day (in a while) that we’ve seen the number of declining stocks higher than advancing stocks and declining-volume higher than advancing-volume on the day. This shift in the daily data can sometimes indicate a shift in market action, i.e., it may indicate a shift down for the markets. I really don’t know – the bullish trend has been fighting the indicators (and winning) for much of 2017. 75% of the ETFs I track have been up over the last 2-weeks; that hardly looks like a market that will crack soon, but we’ll see.
 
I am slightly bearish short-term; longer term I am a bull, but I recommend caution with the Fed raising rates and shrinking its balance sheet. In addition, we are due for a correction in 2018 due to Presidential election cycle history.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I hold Intel – I’m waiting for a better entry point before adding other positions. Intel is now a value play so I am holding it…BUT…selling in INTEL has picked up again and if it continues down it needs to be sold…perhaps soon…
Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals slipped to Neutral on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication.)
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                                                        
Tuesday, Price indicator was positive; Sentiment was negative; Volume & VIX indicators were neutral.  With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
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) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.

Monday, January 8, 2018

Hussman Market Commentary Excerpt … Stock Market Analysis … ETF Trading … Dow 30 Ranking

Busy day, but I did manage to crunch the numbers tonight.
 
JANUARY 2018 HUSSMAN COMMENTARY EXCERPT (Hussman Funds)
“As we begin 2018, the most appropriate starting point is to clarify our actual investment stance. A central aspect of our outlook is the distinction between investment and speculation. If Wall Street believes that stock prices could advance further because investors temporarily have a speculative bit in their teeth, and that they care more that the environment “feels good” than about any careful evaluation of long-term investment prospects, we have no strenuous objection to that argument. Indeed, that’s exactly why, until we see more than the early deterioration in market internals we observe at present, our immediate investment outlook is rather neutral. On the other hand, if Wall Street believes that current valuations are actually “justified,” that 10-12 year S&P 500 total returns are likely to be meaningfully positive, or that the S&P 500 will avoid a collapse on the order of -65% over the completion of the current market cycle, my view is that these beliefs are strenuously at odds with the evidence from a century of market history.” - John Hussman, PhD. Commentary at…
 
MARKET REPORT / ANALYSIS         
-Monday the S&P 500 was up about 0.2% to 2748.
-VIX was up about 3% to 9.52.
-The yield on the 10-year Treasury rose to 2.488%.
 
My sum of 17 Indicators slipped from +6 to +5 today. On a 10-day basis, values were down slightly. A “+” number means that most indicators are bullish.
 
No point in getting too detailed in the write-up today. Most short-term indicators are bearish.  I am not shorting though.  So many of these normally reliable indicators are questionable now as Investors and Traders seem to be in the mood to buy, buy, buy. It looks like the markets may trade sideways for a while until they don’t – at that point I think we’ll see some sort of pullback. We just don’t know how big.
 
I am bearish short-term; longer term I am a bull, but I recommend caution with the Fed raising rates and shrinking its balance sheet. In addition, we are due for a correction in 2018 due to Presidential election cycle history.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I hold Intel – I’m waiting for a better entry point before adding other positions. Intel is now a value play so I am holding it. Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained Positive on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication. At this point, they look too good.) 
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                                                        
Monday, Price indicator was positive; Sentiment was negative; Volume & VIX indicators were neutral.  With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
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) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.

Friday, January 5, 2018

Payroll Report … Factory Orders … ISM Services … Stock Market Analysis … ETF Trading … Dow 30 Ranking

PAYROLL REPORT (Bloomberg)
“Employers added 148,000 workers, compared with the 190,000 median estimate of economists surveyed by Bloomberg, held back by a drop in retail positions, a Labor Department report showed Friday. The jobless rate was at 4.1 percent for a third month, while average hourly earnings increased by 2.5 percent from a year earlier, after a 2.4 percent gain in November that was revised downward.” Story at…
My cmt: The Unemployment rate is now 4.1%. A friend who is an MBA told me that he was taught that 4% was as low as the employment rate can go. In other words, we are very close to maximum employment.
 
FACTORY ORDERS (Morningstar)
“Sales at U.S factories rose steadily in November, suggesting the strengthening U.S. and global economies are boosting demand for American goods.
Factory orders, reflecting sales of everything from paper to bulldozers, increased 1.3% in November from a month earlier…” Story at…
 
ISM SERVICES
“…the ISM gauge on the vast U.S. services sector unexpectedly fell for a second straight month in December to 55.9 from 57.4 in November… “You are still seeing growth,” Nieves [Anthony Nieves, chair of the Institute for Supply Management’s non-manufacturing business survey committee] said on a conference call with reporters after ISM released its non-manufacturing activity data for December earlier.” Story at…
 
MARKET REPORT / ANALYSIS         
-Friday the S&P 500 was up about 0.7% to 2743.
-VIX was unchanged at 9.22.
-The yield on the 10-year Treasury dipped slightly to 2.477%.
 
My sum of 17 Indicators improved from +5 to +6 today. On a 10-day basis, values were flat. A “+” number means that most indicators are bullish.
 
In the last 5-years, the S&P 500 has never outperformed Utilities (XLU) as much as now. Utilities are a safe haven so this is a sign of complacency in the markets. Conversely, XLI (Cyclical Industrials) are outperforming the S&P 500, but not at an extreme. Cyclicals don’t do as well vs the S&P 500 if investors are worried. Currently, no one is worried. The extreme low VIX (below 10) is more evidence of complacency.
 
More topping indicators are negative today: Bollinger Bands remain “overbought”, a sell signal for this indicator; RSI is overbought which is now a sell signal and so is the Overbought-Oversold ratio.  The S&P 500 is 10.2% above its 200-day moving average and that is a sell signal too. Today was another statistically-significant up-day suggesting a down day for tomorrow about 60% of the time. If this isn’t a top, there will be one soon. It may be a short-term top or a bigger problem we don’t know.
 
I am bearish short-term; longer term I am a bull, but I recommend caution with the Fed raising rates and shrinking its balance sheet. In addition, we are due for a correction in 2018 due to Presidential election cycle history.
 
TODAY’S 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…
Energy (XLE) was #1. The markets are due for some reversion so perhaps I’ll get a better buying opportunity later.  I’ll wait before adding any positions. (I hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
 
Under my system in 2017, Technology (XLK) was ranked in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted correctly.) XLK was up 35% on the year. Its weighted Average PE is 23.7.
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock. 
 
Caterpillar remained #1.
I hold Intel – I’m waiting for a better entry point before adding other positions. Intel is now a value play so I am holding it. 
 
Avoid GE and Merck. Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved to Positive on the market. (Market Internals are based on a package of internals and all must be positive to create a positive indication.
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, Price indicator was positive; Sentiment was negative; Volume & VIX indicators were neutral.  With VIX recently below 10 for a couple of days each month from May thru December 2017, and now January 2018, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while. VIX below 10 last occurred about 4-months before the year 2007 crash and also several months before the 2001 crash. 6-months with VIX below 10 is unprecedented in the last 20-years.
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) 24 March 2017 in my long-term accounts, based on short-term indicators. The remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation, but I consider it fully invested for my situation.