Tuesday, January 31, 2017

Chicago PMI … Consumer Confidence … Wave Theory … Stock Market Analysis … ETF Ranking

CHICAGO PMI (Investing.com)
“Manufacturing activity in the Chicago-area unexpectedly fell in January, nearing the mark for stagnation and dampening optimism over the U.S. economic outlook, industry data showed on Tuesday. In a report, the Institute for Supply Management (ISM) said its Chicago purchasing managers’ index decreased by 4.3 points to a seasonally adjusted 50.3 this month…” Story at…
“Consumer confidence retreated in January from a more than 15-year high…data from the New York-based Conference Board showed Tuesday. [The] Confidence index fell to 111.8…” Story at…
I can’t begin to explain this version of Elliot Wave Theory and Astrology, but the author has the same opinion as me.  A small correction of about 5% from the top is due.
Chart from…
-Tuesday the S&P 500 slipped about 0.1% to 2279.
-VIX rose about 1% to 11.99
-The yield on the 10-year Treasury slipped to 2.459%.
Since the late-day action has been strong, let’s review the Tea Leaves.
Neutral Signals
-The S&P 500 is near the middle of the upper and lower Bollinger Bands and that is neutral; however, Bands are close together and that is Bearish, so take your pick.
-The cyclical industrial stocks (XLI-ETF) are giving a neutral indication since they are only slightly underperforming the S&P 500. It may shift to the Bear side if it underperforms the S&P 500 for a day or two.
Bear signals: 
-The Money Trend indicator remains slightly down and that’s slightly bearish. Money Trend makes a rough estimate of dollars in and out of stocks, but unlike Money Flow, it does not use Tick in the calculation. 
-The Closing Tick (sum of last trades of the day) was a surprisingly high 752. The 10-day closing Tick is high at 342. 10-dMA of closing tick is considered a sell point when it exceeds of 300 per Tom McClellan.
-My Top Indicator is still at a level that is calling for a pullback based on the S&P 500 outperforming the underlying Market Internals.
-My sum of 16-indicators is now +1 on the day, but it was +8 just 2-days ago. It is bearish on a 10-day basis and a smoothed version of the10-day is pointing down too.
-The Calm-Before-the Storm indicator (based on statistical analysis of market volatility) is still calling for a selloff. (This indicator is similar to Bollinger Bands.)
-Advancing volume has been trending down since mid-November.
-New-High/New-Low numbers are headed down.
Bullish indicators:
-Late day action is up and that’s bullish.  It is usually interpreted to mean the Pros are buying and this is a fairly reliable indicator.
The end of the month and the first couple of days of a new-month are bullish as 401-k funds are invested, but overall, the market remains stretched. As I’ve said for a while, 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 am a Bull.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 59-days: Financial Select Sector SPDR ETF (XLF).
Here’s today’s complete result of the ETF Ranking.
I would avoid IBB and XLV; currently their 120-dMAs are declining.
*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.  
Now I wish I had tightened trading rules sooner. I am underwater again!
-10-day moving average of the percentage of stocks advancing (NYSE): 52.1%. (50.2% prior trading-day.) A number above 50% is usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.9%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Improved from -62 to -23 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +53 (It was +16 prior trading day.)
-10-day moving average of the change in spread: -3. In other words, over the last 10-days, on average, the spread has decreased by 3 each day.
Market Internals switched 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). 
Tuesday, the Sentiment, VIX & Volume indicators were neutral. The Price indicator was positive.
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.