Thursday, February 16, 2017

Housing … Unemployment Claims … Philadelphia Fed … Black Swan: A Trump Impeachment … Stock Market Analysis … Trading ETFs and ETF Ranking

HOUSING (Reuters)
“U.S. homebuilding fell in January as the construction of multi-family housing projects dropped, but upward revisions to the prior month's data and a jump in permits to a one-year high suggested the housing recovery remained on track.” Story at…
“Fewer Americans than forecast filed last week applications for unemployment benefits, underscoring a vibrant labor market. Jobless claims rose by 5,000 to 239,000 in the week ended Feb. 11, a report from the Labor Department showed Thursday…Near historic lows, first-time claims have been below 300,000 for the longest period since 1970.” Story at… 
“The Philadelphia Fed said its manufacturing index soared in February to a 33-year high, in another indication of improving business sentiment in the wake of a Republican election sweep. The Philadelphia Fed index surged to a reading of 43.3 from 23.6 in January.” Story at…
“There’s already talk of impeachment, just three weeks into Donald Trump’s turbulent presidency. In fact, many are already betting on it….And the odds aren’t as long as you might think. Ladbrokes, the British odds making giant, has Trump’s chances of leaving office via resignation or impeachment and removal at just 11-to-10, or just a little worse than even money.” Story at…
My cmt: The odds are 4-1 against impeachment this year in Ireland. That’s still pretty high, isn’t it?
MORE TRUMP SPECULATION (International Business Times)
“If Trump's team were found to have conspired with Russia to interfere in the election, experts believe this could constitute grounds for impeachment under anti-treason laws. Former NSA legal counsel Susan Hennessey told Forbes that "If sufficient evidence emerges that the FBI has substantiated the allegations or is preparing criminal indictments, then even hardline Republicans in Congress will likely call for [US vice president Mike] Pence to take the oath of office." Story at…
-Thursday the S&P 500 was down about 0.1% to 2347.
-VIX dropped about 2% to 11.76.
-The yield on the 10-year Treasury dipped to 2.448%. (Since the yield is an inverse to price, this means investors were buying Treasuries.)
The crisis is on; the market actually dropped for one day.  There was late day buying that hinted at a bullish turn.  Longer term, late day action suggests the Pros are lightening up after the big bull run.
As previously noted, the Market is overextended, but NEVER MIND; stocks appear that they will keep going up forever. EVERYONE IS BULLISH.
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.  While momentum isn’t stock performance per se, momentum is closely related to stock performance. For example, over the 4-months from Oct thru mid-February 2016, Financials (XLF) have outperformed the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see NTSM Page at…
I would avoid XLU and iEAFE; currently their 120-dMAs are declining.
Recommended ETF Portfolio of top 3:
-Financial Select Sector SPDR (XLF)
-iShares U.S. Aerospace & Defense (ITA)
-iShares Russell 2000 (IWM)
Also, the Industrial Select Sector SPDR ETF (XLI) Technology Select Sector SPDR ETF (XLK) are close to the others.
SHORT-TERM 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!
-“In a bull market, you can only be long or neutral.” – D. Gartman
-“The best policy is to avoid shorting unless a major bear market is underway and downside momentum has been thoroughly established. Even then, your timing must sometimes be perfect. In a bull market the trend is truly your friend, and trading against the grain is usually a fool's errand.” – Clif Droke.
 “There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
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). 
Thursday, Price was positive; Sentiment, VIX & Volume indicators were neutral.
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.