“Inflation rose in 2016 at the fastest pace in five
years, as rising rents and medical care and higher gas prices put a squeeze on
consumers. The consumer price index jumped 0.3% in December…” Story at…
INDUSTRIAL PRODUCTION (Reuters)
“U.S. industrial production rebounded in December due to
the biggest jump in utilities since 1989 as temperatures cooled across the
country. The Federal Reserve said on Wednesday industrial output rose 0.8
percent last month…” Story at…
My cmt: For the last quarter, industrial production was
down 0.6%.
RECESSION INDICATOR (Advisor Perspectives)
“Official recession calls are the responsibility of the
NBER Business Cycle Dating Committee…There is…a general belief that there are
four big indicators that the committee weighs heavily in their cycle
identification process. They are: (1) Nonfarm Employment (2) Industrial
Production (3) Real Retail Sales (4) Real Personal Income (excluding Transfer
Receipts).” – Doug Short.
Additional charts and commentary at…
FED BEIGE BOOK (Federal Reserve)
“Reports from the twelve Federal Reserve Districts
indicated that the economy continued to expand at a modest pace across most
regions from late November through the end of the year. Manufacturers in most
Districts reported increased sales with several citing a turnaround versus
earlier in 2016….All Districts reported
varying degrees of growth in employment and a majority described their labor
markets as tight…Firms across the country and industries were said to be
optimistic about growth in 2017.” FED Beige Book at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.2% to 2272.
-VIX rose about 5% to 12.48. (It looks like the Options Boys
are worried.)
-The yield on the 10-year Treasury rose to 2.426%.
WHAT THE TEA LEAVES SAY…
-The Money Trend indicator had been giving a bullish
indication. Today it turned flat, or neutral. Money Trend estimates dollars
into and out of stocks.
Bear signals:
-The 10-day closing Tick is high at 310. 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. (If one
just counts up days vs down days, it’s up.)
-My Top Indicator is still calling for a pullback based
on the S&P 500 outperforming the underlying Market Internals. The indicator
turned more bearish today.
-The cyclical industrial stocks (XLI-ETF) improved today,
but the ETF is still underperforming the S&P 500 and that shows investor
worry.
-My sum of 16-indicators is now -2 on the day, down from
+6 last trading-day, and it switched to bearish on a 10-day basis.
-VIX is rising from very low levels.
-Market Internals that I track are all negative.
-The Calm-Before-the Storm indicator (based on
statistical analysis of market movement) is calling for a selloff.
Bullish indicators:
NONE (at least of the ones that I track). Ooopps.
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)* - #3 Switched
-
#1 RANK for the past 50-days: Financial Select Sector
SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: Energy Select Sector SPDR ETF (XLE)
*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:
WEDNESDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.7%. (56.9% prior trading-day.) A number above 50% is
usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.9%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Dropped from +19 to +18
(percentage calculation method adjusted to fit McClellan’s values) basically no
change.
-New-highs minus new-lows: +66
(It was +83 prior trading day.)
-10-day moving average of the change in spread: -7. In
other words, over the last 10-days, on average, the spread has decreased by 7
each day.
Market Internals switched
to negative 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
Wednesday, 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.
