Wednesday, January 25, 2017

Crude Inventories … Richmond FED … S&P 500 at Extremes … Stock Market Analysis … Rank Performance of ETFs

“U.S. crude stockpiles rose by 2.8 million barrels in the week through Jan. 20, matching analysts expectations and roughly in line with an earlier report from the American Petroleum Institute…‘It was a very bearish report, and it's a cloud over this market, but it's no asset class left behind at the moment,’ Kilduff [John Kilduff, Capital founding partner] said.” Story at...

“Fifth District manufacturing activity strengthened in January, with continued growth in new shipments and the volume of new orders. Employment picked up, although increases in average manufacturing wages were less widespread than in December. The average workweek continued to grow, but increases were less prevalent in January than a month earlier. Growth in input prices moderated, while growth in prices of finished goods accelerated. Expectations for shipments in the next six months were upbeat, and survey participants' outlook for the volume of new orders continued to be optimistic…” – Richmond FED. For charts and analysis see…
(This commentary was titled, “Technically Speaking: The Immediacy Trap” at the Real Investment Advice website.)
“Currently, while only slightly below the peak of the 2000 “” bubble, the deviation [from the long-term trend-line] is at levels that have ALWAYS coincided with a negative mean reverting event or very poor, and highly volatile, forward returns.” – Lance Roberts. Commentary at…
-Wednesday the S&P 500 rose about 0.8% to 2298.
-VIX dropped about 6% to 10.81. (VIX hasn’t been this low since July of 2014. The lack of fear is making me afraid.)
-The yield on the 10-year Treasury rose to 2.514%.
Today was another statistically significant up-day (based on statistical analysis of market volatility) and that is followed by a down-day about 62% of the time. Further, this is the sixth statistically-significant day in the last 16-trading sessions; but only one of those days has been down.  This stat is looking more bullish, but other indicators are suggesting down, and really, so does this one.
Closing Tick (a sum of last trades of the day) was a high 326.  “300” is considered a sell point by Tom McClellan. A number of other indicators remain pointing down too.
Bollinger Bands are indicating “overbought” since the S&P 500 Index now exceeds the upper Bollinger Band. That’s more than a 2-std-deviation move above the mean and it usually results in at least a 3% pullback.  With the number of other indicators showing stretched conditions one would expect a slightly higher pullback. Of course there is a possibility of a >10% correction, however; so far, there is little news to set it off. On the other hand, we see that there has been strong up-trend late in the day the last couple of days so perhaps this rally still has legs? We’ll see…
It seems to me that if President Trump were to implement his “build it in America and tax the foreigners like they tax us” policies overnight, it would be inflationary since the cost of goods must go up. This would benefit the middle class and poor, thru more jobs, and hurt the upper-classes. The upper class would be hurt with higher prices and reduced stock values associated with inflationary conditions. He is talking about going after the Drug industry, too. At this point, the market doesn’t care much so my musings are meaningless in the short-run. (The exceptions are Biotech and Pharma and they are about the only sectors to fall this week, but even they were up today.) I will say this about Trump though; he is the most unique President in recent memory. 
I am beginning to sound like a broken record on the market: Short-term indicators continue to show that the market is stretched; I think the upside potential is limited while the downside risk remains fairly high, at least for a short-term pullback. I remain a short-term bear and a long-term bull.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 55-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): 55.3%. (55.3% 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: Rose from +48 to +74 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +123 (It was +128 prior trading day.)
-10-day moving average of the change in spread: +24. In other words, over the last 10-days, on average, the spread has increased by 24 each day.
Market Internals remained 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). 
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.