“The Bureau of Labor Statistics (BLS) has released its
monthly non-farm payroll report…and results are again a bit lower than
expected. 156K new jobs (non-farm-related) were created in the month of
December, and the unemployment rate rose 10 basis points to 4.7%.” Story at…
HOURLY EARNINGS (FXStreet)
“After ticking down in November, average hourly earnings
rebounded 0.4 percent last month. That brings the year-over-year rate, at 2.9
percent, to a fresh cycle high (middle chart).” Story at…
FACTORY ORDERS (CNBC/Reuters)
“New orders for U.S.-made goods fell in November…but the
underlying trend suggested manufacturing is gradually firming. Factory goods
orders declined 2.4 percent…” Story at…
My cmt: The news may be too good. The FED could come into play sooner than many
expect. It’s worth watching.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.4% to 2277. (A new
high; the NYSE Composite Index matched its prior high.)
-VIX fell about 2% to 11.32.
-The yield on the 10-year Treasury was dipped slightly to
2.42%.
TRADING VXX
Friday the “calm-before-the-storm” indicator flashed
sell. This indicator is very similar to Bollinger Bands because it tracks daily
moves in price-volume and warns of a coming top when the standard deviation
reaches levels associated with declines.
It has been very reliable in the past. Here are the results from this
strategy over the past 2-years:
5 Aug 2016 BUY VXX / 15 SEP SELL VXX: Gain 6.6%
17 June 2016 BUY VXX / 23 June SELL VXX: Gain 8%
9 June 2016 BUY VXX / 29 June 2016 SELL VXX: Gain 5.5%
23 Apr 2015 BUY VXX / 7 May 2015 SELL VXX: Gain 3.9%
26 Nov 2014 BUY VXX / 10 Dec 2014 SELL VXX: Gain 13.6%
29 AUG 2014 BUY VXX / 25 Sep 2014 SELL VXX: Gain 7.9%
There were no losses and only 1-false call; the 3.9% gain
in Apr 2015 did not include a large move indicating a sell. (Without a sell signal, the position must be
sold in 5-days by rule.) Because VXX is highly volatile, this is a high risk
trade; there are no guarantees.
Since I mentioned Bollinger Bands, they are very close
together and that is bearish, although it has not yet gotten to a “squeeze”. (For that signal to occur, the Bands must get
as close as they have been in the last 6-months.) In addition, the S&P 500
has gotten very close to the upper Band (2-standard deviations in price) and
that too is bearish. Bollinger bands are
confirming the VXX trade as is the Topping Indicator. Essentially, the S&P 500 remains too far
in front of the market internals and this usually indicates a pullback is
coming.
Not all indicators are negative:
My 10-day sum of 16 indicators improved from +12 to +21
Friday and Money Trend remains up. This is not surprising considering how
bullish investors have been recently.
Given the reliability of negative indicators, I expect to
see the Index fall 4-5% from its high.
Long-term, I’m fully invested at 50% in stocks (a
conservative-retiree allocation). The
long-term trend remains up. I must say though, only 3.6% of securities on the
NYSE were advancing today. That is
exceptionally low at an all-time high. In fact, it is almost exactly the same
number as the all-time high back in January of 2000. At this point, it’s just a
concern.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 43-days: Financial Select Sector
SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: Energy Select Sector SPDR ETF (XLE)
While the XLF remains ranked #1 using the methodology
explained at the link below, IWM is outperforming the others over the past
3-weeks on a percentage gained basis.
*For background on the ETF ranking system see NTSM Page
at…
TRADING PORTFOLIO (Small-% of the total portfolio)*
2x Short S&P 500 (SDS): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
Long Volatility ETF (VXX): Established 6 Jan 2017.
NET: +8.7%
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.7%. (54.6% prior trading-day.) A number above 50% is
usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.6%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Fell from +89 to +60 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +98
(It was +122 prior trading day.)
-10-day moving average of the change in spread: -2. In
other words, over the last 10-days, on average, the spread has decreased by 2
each day.
Market Internals were
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
Friday, the Volume indicator was neutral. The Price and
VIX indicators were positive. The Sentiment indicator was negative.
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.
