Tuesday, January 17, 2017

Empire Manufacturing … Options Suggest a Stock Selloff … Lance Roberts Commentary … Stock Market Analysis … ETF Ranking

EMPIRE MANUFACTURING (Fox Business)
“Factory activity across New York state remained in positive territory, according to a report from the Federal Reserve on Tuesday, and firms remained optimistic about future conditions. The Federal Reserve Bank of New York's general business conditions index came in at 6.5 this month from a reading of 7.6 in December.” Story at… 
 
MASSIVE STOCK MARKET SELLOFF (MarketWatch)
“If options traders are correct, stocks are in for a wild ride in February.
Demand for one-month call options tied to the CBOE Volatility Index, a popular gauge of stock-market volatility, has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump.” Story at…
 
LANCE ROBERTS COMMENTARY (RIA)
“….since the beginning of the year, the rush to pile into “Trump Trades” has quickly evaporated as transaction volumes have plunged as “anticipation” has turned into “wait and see.” It is worth noting that previous, when transaction volumes have plunged to such low levels, the markets were generally at an inflection point of a correctionary process. With the markets currently extremely overbought and extended, the reality of a “sell the inauguration” trade is possible.” - Lance Robert. Commentary at…
 
MARKET REPORT / ANALYSIS        
-Tuesday the S&P 500 was down about 0.3% to 2268.
-VIX rose about 6% to 11.87.
-The yield on the 10-year Treasury dipped to 2.323%.
 
I am beginning to wonder about my on-going “bear call”. As evidence I present (above) just two of the bearish articles I have seen recently. I have long noted that when everyone is sure something will happen in the stock market, the outcome is usually the opposite.  In short, if everyone thinks the market is going down, it won’t.  Further, and this is a relatively new development, the Wall Street algorithms are designed to bet against the crowd. The market is stretched and it will drop, but perhaps it will take even longer for this pullback to occur. We’ll see…
 
The following, although updated, is somewhat repetitive; but not much has changed recently.
Bear signals:
-The old standby Advance-Decline Ratio remains “overbought”.
-The 10-day closing Tick is high at 344. Closing tick of 300 is considered a sell point per Tom McClellan
-The S&P 500 Index remains close to its upper Bollinger Band a decidedly bearish indication.
-Late day action is down on a 10-day basis, but it depends how one measures this – on a percentage of price it is down.
-My Top Indicator is still calling for a pullback based on the S&P 500 outperforming the underlying Market Internals. Even though today was down, the indicator turned more bearish.
-The cyclical industrial stocks (XLI-ETF) is underperforming the S&P 500 and that shows investor worry. If one is worried, sell the cyclicals first.
 
Bullish indicators:
-Money Trend has been moving up.  It estimates dollars into and out of stocks. 
-My sum of 16-indicators is now +6 on the day, down from +8, but it has been improving on a 10-day basis…but I remain unconvinced because my short-term indicators are still pointing down.
 
The market is stretched and may continue to stretch higher, but overall, I think the upside potential is limited while the downside risk is fairly high, at least for a short-term pullback. I remain a short-term bear.
 
Long-term, I’m fully invested at 50% in stocks (a conservative-retiree allocation – I don’t do short-term timing with retirement money). 
 
CURRENT RANKING OF 11 ETFs (Ranked Daily)* - Unchanged -
#1 RANK for the past 49-days: Financial Select Sector SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: iShares U.S. Aerospace and Defense ETF (ITA)
*For background on the ETF ranking system see NTSM Page at…

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:
 
TUESDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks advancing (NYSE): 56.9%. (56.9% prior trading-day.) A number above 50% is usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.8%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Dropped from +51 to +19 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +83 (It was +124 prior trading day.)
-10-day moving average of the change in spread: +4. In other words, over the last 10-days, on average, the spread has increased by 4 each day.
Market Internals slipped to 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
Tuesday, the Sentiment, VIX & Volume indicators were neutral. The Price indicator was positive.
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, 23 Sep 2016 in my long-term accounts. Remainder is 50% G-Fund. This is a conservative retiree allocation.

Monday, January 16, 2017

Martin Luther King Day

“-Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.
-We must learn to live together as brothers or perish together as fools.
-Our lives begin to end the day we become silent about things that matter.
-Injustice anywhere is a threat to justice everywhere.”  – ML King

Sunday, January 15, 2017

Producer Price Index … Retails sales … Business Inventories … Michigan Sentiment … Correction Coming … Stock Market Analysis … ETF Ranking

I didn't post this Friday...operator error I imagine.
PRODUCER PRICE INDEX (Bloomberg)
“Wholesale prices in the U.S. rose for the third time in four months, boosted by increasing fuel costs that are pushing inflation higher throughout the economy. The producer-price index gained 0.3 percent in December…” Story at…
Year-over-year inventories increased 1.4%.
 
RETAIL SALES (WSJ)
“Americans splurged on cars and online shopping during the holidays, but not much else. Sales at U.S. retailers and restaurants rose 0.6% in December from a month earlier…” Story at…
 
BUSINESS INVENTORIES (MarketWatch)
“Business inventories in the U.S. climbed 0.7% in November, just as the holiday shopping season got under way. The monthly rise more than offset a decline in October.” Story at…
“The key takeaway from the report is that business inventories continue to remain at an elevated level relative to sales, which will continue to weigh on pricing power.” From…
 
MICHIGAN SENTIMENT (Marketwatch)
“The surge in consumer confidence seen since the presidential election continued in late December, according to a report from the University of Michigan released Friday. The final December reading on consumer sentiment rose to 98.2…” Story at…
 
CORRECTION COMING (Safehaven)
“…analysis of the recent VIX action is clearly warning of a potentially massive price volatility increase in the US and global markets. Many traders use and trade the VIX as a measurement of volatility. The VIX is a measurement of the expected market volatility over the next 30 days. As the VIX rises, traders expect larger and more volatile price swings. As the VIX declines, traders expect smaller and more narrow price swings. Currently, the VIX is near historical low levels and has recently past a critical cycle midpoint.” Commentary at…
 
MARKET REPORT / ANALYSIS        
-Friday the S&P 500 was up about 0.2% to 2275. (For the 3rd time in 6-days.)
-VIX dropped about 3% to 11.23.
-The yield on the 10-year Treasury rose to 2.399%.
 
Bear signals:  
-The old standby Advance-Decline Ratio remains “overbought”.
-The 10-day closing Tick is high at 287. Closing tick of 300 is considered a sell point per Tom McClellan
-The S&P 500 Index is close to its upper Bollinger Band a decidedly bearish indication.
-Late day action is down on a 10-day basis.
-My Top Indicator is still calling for a pullback based on the S&P 500 outperforming the underlying Market Internals.
 
Bullish indicators:
-Money Trend has been moving up.  It estimates dollars into and out of stocks. 
-My sum of 16-indicators is now +8 on the day and has been improving on a 10-day basis too and that’s bullish…but I remain unconvinced because my short-term indicators are still pointing down.
 
The market is stretched and may continue to stretch higher, but overall, I think the upside potential is limited while the downside risk is fairly high, at least for a short-term pullback.
 
I remain a short-term bear.
 
Long-term, I’m fully invested at 50% in stocks (a conservative-retiree allocation – I don’t do short-term timing with retirement money). 
 
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 48-days: Financial Select Sector SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: iShares U.S. Aerospace and Defense ETF (ITA)
*For background on the ETF ranking system see NTSM Page at…
 
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:
 
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks advancing (NYSE): 56.9%. (55.6% prior trading-day.) A number above 50% is usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.7%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Dropped from +26 to +51 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +124 (It was +62 prior trading day.)
-10-day moving average of the change in spread: +9. In other words, over the last 10-days, on average, the spread has increased by 9 each day.
Market Internals were 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
Friday, the VIX & Volume indicators were neutral. The Price indicator was positive. The Sentiment indicator was 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, 23 Sep 2016 in my long-term accounts. Remainder is 50% G-Fund. This is a conservative retiree allocation.

Thursday, January 12, 2017

Jobless Claims … Stock Market Analysis … ETF Ranking

JOBLESS CLAIMS
“The number of Americans who applied for unemployment benefits in the first week of 2017 rose by 10,000 to 247,000, but they remain near the lowest level in decades.” Story at…
 
MARKET REPORT / ANALYSIS        
-Thursday the S&P 500 was down about 0.2% to 2270.
-VIX rose about 2.5% to 11.54.
-The yield on the 10-year Treasury dipped slightly to 2.361%.
 
Thursday looked like an opposite of yesterday - the day was down, but many market indicators turned up. I’ll just note that the most important indicators are still headed down so that I am still a short-term bear. There is a new bear signal too: 52-week new-highs are falling sharply and that tends to signal the trend since it is diverging from the S&P 500 as seen in the chart below. The Green line is the 40-day moving average that smooths the daily new-high data.
Another bear signal reappeared: The old standby Advance-Decline Ratio is again “overbought”.
 
Long-term, I’m fully invested at 50% in stocks (a conservative-retiree allocation – I don’t do short-term timing with retirement money). 
 
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 47-days: Financial Select Sector SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: iShares U.S. Aerospace and Defense ETF (ITA)
*For background on the ETF ranking system see NTSM Page at…
 
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:
 
THURSDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks advancing (NYSE): 55.6%. (54.3% prior trading-day.) A number above 50% is usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.4%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Dropped from +77 to +26 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +62 (It was +104 prior trading day.)
-10-day moving average of the change in spread: +1. In other words, over the last 10-days, on average, the spread has increased by 1 each day.
Market Internals are bouncing on the edge between Positive and Neutral.  Today they were again 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, the VIX & Volume indicators were neutral. The Price indicator was positive. The Sentiment indicator was 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, 23 Sep 2016 in my long-term accounts. Remainder is 50% G-Fund. This is a conservative retiree allocation.