Wednesday, January 18, 2017

Consumer Price Index (CPI) … Industrial Production … Recession Indicator Improves … FED Beige Book … Stock Market Analysis … Ranked ETF Performance

CPI (MarketWatch)
“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…
“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…
-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%.
-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.  
-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). 
Wednesday, 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.